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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ASSOCIATES FIRST CAPITAL CORPORATION,
AFCC NEWCO, INC.
AND
ARCADIA FINANCIAL LTD.
DATED AS OF NOVEMBER 12, 1999
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER
1.1 The Merger.................................................. 1
1.2 Closing..................................................... 1
1.3 Effective Time.............................................. 1
1.4 Effects of the Merger....................................... 2
1.5 Conversion of Company Common Stock.......................... 2
1.6 Options and Restricted Stock................................ 3
1.7 Articles of Incorporation................................... 3
1.8 Bylaws...................................................... 3
1.9 Directors and Officers of Surviving Corporation............. 4
ARTICLE II
EXCHANGE OF SHARES
2.1 Establishment of Exchange Fund.............................. 4
2.2 Exchange of Shares.......................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
3.1 Corporate Organization...................................... 5
3.2 Capitalization.............................................. 7
3.3 Authority; No Violation..................................... 8
3.4 Consents and Approvals...................................... 9
3.5 Regulatory Reports.......................................... 10
3.6 Broker's Fees; Opinion of Company Financial Advisor......... 10
3.7 Absence of Certain Changes or Events........................ 10
3.8 Legal Proceedings........................................... 10
3.9 Taxes and Tax Returns....................................... 10
3.10 Employees................................................... 12
3.11 SEC Reports................................................. 14
3.12 Financial Statements........................................ 14
3.13 Licenses; Compliance with Applicable Law.................... 14
3.14 Certain Contracts........................................... 15
3.15 Agreements with Regulatory Agencies......................... 16
3.16 Investment Securities....................................... 16
3.17 Interest Rate Risk Management Instruments................... 16
3.18 Undisclosed Liabilities..................................... 16
3.19 Environmental Liability..................................... 16
3.20 Information Supplied........................................ 17
3.21 Insurance................................................... 17
3.22 Year 2000 Compliance........................................ 17
3.23 Intellectual Property....................................... 17
3.24 Rights Agreement............................................ 18
3.25 State Anti-Takeover Statutes................................ 18
3.26 Properties.................................................. 18
3.27 Receivables................................................. 18
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.1 Corporate Organization...................................... 19
4.2 Authority; No Violation..................................... 19
4.3 Consents and Approvals...................................... 20
4.4 Broker's Fees............................................... 20
4.5 Funds....................................................... 21
4.6 Information Supplied........................................ 21
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Company Businesses Prior to the Effective Time... 21
5.2 Forbearances of Company..................................... 21
5.3 Transition.................................................. 24
5.4 Notification of Tax Proceedings............................. 25
5.5 Transfer Taxes.............................................. 25
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Company Shareholders Meeting; Preparation of Proxy 25
Statement...................................................
6.2 Reasonable Best Efforts..................................... 26
6.3 Access to Information....................................... 27
6.4 Employee Benefits........................................... 27
6.5 Indemnification; Directors' and Officers' Insurance......... 28
6.6 Additional Agreements....................................... 29
6.7 Advice of Changes........................................... 29
6.8 No Solicitation............................................. 29
6.9 Publicity................................................... 30
6.10 Stockholder Litigation...................................... 31
6.11 Anti-Takeover Provisions.................................... 31
6.12 Stop Transfer............................................... 31
6.13 [Intentionally Omitted]..................................... 31
6.14 Agreed Upon Procedures...................................... 31
6.15 [Intentionally Omitted]..................................... 31
6.16 Tax Schedules............................................... 31
6.17 Listing..................................................... 31
6.18 Employee Retention.......................................... 31
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the 32
Merger......................................................
7.2 Conditions to Company's Obligations to Effect the Merger.... 32
7.3 Conditions to Parent's and Sub's Obligations to Effect the 32
Merger......................................................
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination................................................. 33
8.2 Effect of Termination....................................... 34
8.3 Amendment................................................... 36
8.4 Extension; Waiver........................................... 36
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements... 36
9.2 Expenses.................................................... 36
9.3 Notices..................................................... 36
9.4 Interpretation.............................................. 37
9.5 Counterparts; Facsimile..................................... 37
9.6 Entire Agreement............................................ 38
9.7 Governing Law............................................... 38
9.8 Severability................................................ 38
9.9 Assignment; Third Party Beneficiaries....................... 38
9.10 Enforcement................................................. 38
9.11 Schedules................................................... 38
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 12, 1999 (this
"AGREEMENT"), by and among ASSOCIATES FIRST CAPITAL CORPORATION, a Delaware
corporation ("PARENT"), AFCC NEWCO, INC., a Minnesota corporation and a
wholly-owned subsidiary of Parent ("SUB"), and ARCADIA FINANCIAL LTD., a
Minnesota corporation ("COMPANY").
WHEREAS, the respective Boards of Directors of Parent, Sub and Company have
determined that the merger of Sub with and into Company (the "MERGER"), with
Company as the surviving corporation of the Merger (the "SURVIVING
CORPORATION"), each upon the terms and subject to the conditions set forth in
this Agreement, are advisable and fair to and in the best interests of their
respective stockholders;
WHEREAS, as an inducement and condition to Parent and Sub entering into this
Agreement, and concurrently with the execution of this Agreement, certain
affiliates of Company are executing and delivering to Parent a Voting Agreement
(the "SUPPORT AGREEMENT") dated as of the date hereof; and
WHEREAS, simultaneously with the execution of this Agreement, an affiliate
of Parent and Company entered into a Continuous Asset Purchase Agreement (the
"PURCHASE AGREEMENT") and a Master Servicing Agreement (together with the
Purchase Agreement, the "RECEIVABLES AGREEMENTS");
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions therefor.
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement and
in accordance with the Minnesota Business Corporation Act (the "MBCA"), at the
Effective Time (as defined in Section 1.3), Sub shall merge with and into
Company. Company shall be the Surviving Corporation in the Merger and shall
continue its corporate existence under the laws of the State of Minnesota. Upon
consummation of the Merger, the separate corporate existence of Sub shall
terminate.
1.2 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, the closing of the Merger (the "CLOSING") shall take place at 10:00
a.m., New York City time, on the second business day after satisfaction or
waiver of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date (as defined in this Section 1.2), but subject
to satisfaction or waiver of such conditions on the Closing Date) set forth in
Article VII (the "CLOSING DATE"), at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another date, time or
place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. Upon the Closing, the parties shall file articles of
merger (the "ARTICLES OF MERGER") with the Secretary of State of the State of
Minnesota and shall make all other filings or recordings required under the
MBCA. The Merger shall become effective at such time as the Articles of Merger
shall have been duly filed with the Secretary of State of the State of
Minnesota, or at such later time as is agreed by Parent and Company and
specified in the Articles of Merger (the time the Merger becomes effective being
the "EFFECTIVE TIME").
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1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Section 302A.641 of the MBCA.
1.5 CONVERSION OF COMPANY COMMON STOCK. At the Effective Time by virtue of
the Merger and without any action on the part of Parent, Sub, Company or the
holder of any of the following securities:
(a) Each share of common stock, par value $0.01 per share, of Company (the
"COMPANY COMMON STOCK"), together with the associated preferred stock purchase
rights (the "COMPANY RIGHTS") under the Company Rights Agreement (as defined in
Section 3.24) issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock canceled pursuant to Section 1.5(c)
and Dissenting Shares (as defined in Section 1.5(d))) shall be converted into
the right to receive (i) $4.90 in cash payable to the holder thereof, without
interest thereon (the "CASH CONSIDERATION") and (ii) one residual value
obligation (each, a "RVO") having the principal terms described in Exhibit A
hereto (the "RVO CONSIDERATION", and, together with the Cash Consideration, the
"MERGER CONSIDERATION").
(b) All of the shares of Company Common Stock and Company Rights issued and
outstanding immediately prior to the Effective Time shall no longer be
outstanding and shall automatically be canceled and shall cease to exist as of
the Effective Time, and each certificate (each a "COMMON CERTIFICATE")
previously representing any such shares of Company Common Stock and Company
Rights (other than shares canceled pursuant to Section 1.5(c) and Dissenting
Shares) shall thereafter represent solely the right to receive the Merger
Consideration into which the shares of Company Common Stock and Company Rights
represented by such Common Certificate have been converted pursuant to this
Section 1.5.
(c) At the Effective Time, all shares of Company Common Stock that are held
by Company as treasury stock, if any, or by Parent or any of Parent's
wholly-owned Subsidiaries (as defined in Section 3.1) shall automatically be
canceled and shall cease to exist, and no cash, stock of Parent or other
consideration shall be delivered in exchange therefor.
(d) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time held by holders (if any) who have not voted in favor of this Agreement or
consented thereto in writing and who have demanded dissenters' rights with
respect thereto in accordance with Sections 302A.471 and 302A.473 of the MBCA
and, as of the Effective Time, have not failed to perfect or have not
effectively withdrawn or lost their dissenters' rights under Sections 302A.471
and 302A.473 of the MBCA ("DISSENTING SHARES") shall not be converted into the
right to receive the Merger Consideration as described in Section 1.5(a), but
holders of such shares shall be entitled to receive payment of the fair value of
such Dissenting Shares in accordance with the provisions of Sections 302A.471
and 302A.473 of the MBCA (but only after the amount thereof shall be agreed upon
or finally determined pursuant to the provisions of the MBCA), except that any
Dissenting Shares held by a holder who shall have failed to perfect or shall
have effectively withdrawn or lost its dissenter's rights under Sections
302A.471 and 302A.473 of the MBCA shall thereupon be deemed to have been
converted into the right to receive the Merger Consideration and shall no longer
be considered Dissenting Shares. Company shall give Parent (i) prompt notice of
any written demands for dissenter's rights, attempted withdrawals of such
demands and any other instruments served pursuant to the MBCA received by
Company relating to dissenting shareholders' rights and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for fair value
under the MBCA. Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for fair value
for capital stock of Company, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
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(e) Each share of capital stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one identical share of the
capital stock of the Surviving Corporation and shall constitute the only issued
and outstanding capital stock of the Surviving Corporation following the
Effective Time.
1.6 OPTIONS AND RESTRICTED STOCK. (a) Immediately prior to the Effective
Time, each employee, consultant and director stock option to purchase shares of
Company Common Stock (each, a "COMPANY OPTION") which is then outstanding and
unexercised, whether or not then exercisable, shall be (or, if not previously
vested and exercisable, shall become) vested and exercisable (provided that any
exercise of a Company Option as to which the per share exercise price exceeds
the Cash Consideration shall be for cash) and such Company Options immediately
thereafter shall be canceled by Company pursuant to this Section 1.6, and each
holder of a canceled Company Option shall be entitled to receive at the
Effective Time or as soon as practicable thereafter from Company in
consideration for the cancellation of such Company Option (i) an amount in cash
equal to the product of (A) the number of shares of Company Common Stock
previously subject to such Company Option and (B) the excess, if any, of the
Cash Consideration over the exercise price per share of Company Common Stock
previously subject to such Company Option, less any applicable withholding taxes
and (ii) one RVO for each share of Company Common Stock previously subject to
such Company Option; provided, that a holder of a cancelled Company Option shall
not be entitled to receive any RVO in respect of the cancellation thereof if the
exercise price per share of Company Common Stock previously subject to such
Company Option exceeds the Cash Consideration.
(b) Immediately prior to the Effective Time, each share of restricted
Company Common Stock held by an employee, consultant or director of the Company
or its Subsidiaries ("COMPANY RESTRICTED STOCK"), which is then outstanding and
restricted, shall become vested and such Company Restricted Stock immediately
thereafter shall be converted into the right to receive Merger Consideration.
(c) Company shall (i) take all actions necessary and appropriate so that all
stock or other equity based plans maintained with respect to Company Common
Stock (the "COMPANY STOCK PLANS"), including, without limitation, the plans
listed in Section 3.10(a) of the Company Disclosure Schedule, shall terminate as
of the Effective Time and that any other Employee Plan (as hereinafter defined
in Section 3.10) (including the Company's employee stock purchase plan)
providing for the issuance, transfer or grant of any capital stock of Company or
any interest in respect of any capital stock of Company shall be amended to
provide that no further issuances, transfer or grants shall be permitted as of
the Effective Time and (ii) provide that, following the Effective Time, no
holder of a Company Option or Company Restricted Stock or any participant in any
Company Stock Plan shall have any right thereunder to acquire or receive any
capital stock of Company, Parent or the Surviving Corporation (except as
otherwise set forth in Sections 1.5 or 1.6(a) or (b) above). Prior to the
Effective Time, Company shall (x) obtain all necessary consents from, and
provide (in a form reasonably acceptable to Parent) any required notices to,
holders of Company Options and Company Restricted Stock and (y) amend the terms
of the applicable Company Stock Option, Company Restricted Stock, Company Stock
Plan and the Company's employee stock purchase plan, in each case, as is
necessary to give effect to the provisions of this Section 1.6.
1.7 ARTICLES OF INCORPORATION. Subject to the terms and conditions of this
Agreement, at the Effective Time, the articles of incorporation of Company, as
in effect immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended as provided
therein and by the MBCA.
1.8 BYLAWS. Subject to the terms and conditions of this Agreement, at the
Effective Time, the bylaws of Company, as in effect immediately prior to the
Effective Time, shall, subject to the provisions
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of Section 6.5, be the bylaws of the Surviving Corporation until thereafter
amended as provided therein and by the MBCA.
1.9 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. At the Effective
Time, the directors and officers of Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
following the Merger, to hold office in accordance with the Surviving
Corporation's bylaws and applicable law.
ARTICLE II
EXCHANGE OF SHARES
2.1 ESTABLISHMENT OF EXCHANGE FUND. Prior to the Effective Time, Parent
shall designate First Chicago Trust Company of New York or such other bank or
trust company reasonably acceptable to Company, to act as exchange agent (the
"EXCHANGE AGENT") for the payment of the Merger Consideration. At or prior to
the Effective Time, Parent shall deposit, or shall cause to be deposited, with
the Exchange Agent, for the benefit of the holders of Common Certificates, for
exchange in accordance with this Article II, cash and certificates representing
the RVOs (such cash and certificates being hereinafter referred to as the
"EXCHANGE FUND") to be paid pursuant to Section 2.2(a) in exchange for
outstanding shares of Company Common Stock.
2.2 EXCHANGE OF SHARES. (a) As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record as of the Effective
Time of one or more Common Certificates (other than with respect to shares of
Company Common Stock canceled pursuant to Section 1.5(c)) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Common Certificates shall pass, only upon delivery of the
Common Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the Common Certificates in exchange for the Merger
Consideration. Upon proper surrender of a Common Certificate for exchange and
cancellation to the Exchange Agent, together with such properly completed letter
of transmittal, duly executed, covering such Common Certificate, the holder of
such Common Certificate shall be entitled to receive in exchange therefor a
check representing the amount of the Cash Consideration and a certificate
representing the RVO Consideration, and the Common Certificate so surrendered
shall forthwith be canceled. No interest will be paid or accrued on the Merger
Consideration payable to holders of Common Certificates.
(b) If the payment of the Merger Consideration is to be made to a person
other than the registered holder of the Common Certificate surrendered in
exchange therefor, it shall be a condition to the payment thereof that the
Common Certificate so surrendered shall be properly endorsed (or accompanied by
an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance,
delivery or payment of such Merger Consideration to any person other than the
registered holder of the Common Certificate surrendered, or required for any
other reason, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of Company of the shares of Company Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Common Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be canceled and exchanged for the
applicable Merger Consideration as provided in this Article II.
(d) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Company for 6 months after the Effective Time shall be paid to
Parent. Any shareholders of Company who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of the
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Merger Consideration, without any interest thereon. Notwithstanding the
foregoing, none of the Surviving Corporation, Parent, the Exchange Agent or any
other person shall be liable to any former holder of shares of Company Common
Stock for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(e) In the event any Common Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Common Certificate to be lost, stolen or destroyed and, if reasonably
required by Parent, the posting by such person of a bond in such amount as
Parent may determine is reasonably necessary as indemnity against any claim that
may be made against it with respect to such Common Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Common
Certificate the Merger Consideration.
(f) All cash and RVOs paid upon the surrender of the Common Certificates in
accordance with the terms of Articles I and II shall be deemed to have been paid
in full satisfaction of all rights pertaining to the shares of the Company
Common Stock and Company Rights theretofore represented by such Common
Certificates; SUBJECT, HOWEVER, to the Surviving Corporation's obligation, with
respect to shares of Company Common Stock outstanding immediately prior to the
Effective Time, to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared or made by
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time.
(g) The Exchange Agent shall invest any funds in the Exchange Fund as
directed by Parent. Any interest and other income resulting from such
investments shall be paid to Parent.
(h) No distributions or other payments declared or made with respect to RVOs
after the Effective Time shall be paid to the holder of any unsurrendered Common
Certificate with respect to the RVOs that such holder would be entitled to
receive upon surrender of such Common Certificate until such holder shall
surrender such Common Certificate in accordance with Section 2.2(a). Subject to
the effect of applicable laws, following surrender of any such Common
Certificate, there shall be paid to such holder of RVOs issuable in exchange
therefor, without interest, (i) the amount of distributions or other payments
declared after the Effective Time theretofore paid with respect to such RVOs and
(ii) at the appropriate payment date, the amount of distributions or other
payments declared but not paid or with a record date after the Effective Time
but prior to such surrender with a payment date subsequent to such surrender
payable with respect to such RVOs.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Sub as follows:
3.1 CORPORATE ORGANIZATION. (a) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota.
Company has all requisite corporate power and authority to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and in good standing
in each jurisdiction (whether federal, state, local or foreign) in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary other than in such jurisdictions where the failure so to
qualify would not have, individually or in the aggregate, a Material Adverse
Effect on the Company. As used in this Agreement, (i) the term "MATERIAL ADVERSE
EFFECT" means, with respect to Company, a material adverse effect on the
business, assets (tangible or intangible), liabilities, operations, condition
(financial or otherwise) or results of operations of Company and its
Subsidiaries either individually or taken as a whole, or on the ability of
Company to perform its obligations under
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and to consummate the transactions contemplated by this Agreement on a timely
basis, excluding any material adverse effect that arises from or is attributable
to (A) general economic conditions, (B) conditions (political, economic,
regulatory, competitive or otherwise) that adversely affect the industry in
which Company operates, (C) actions taken by lenders, rating agencies or others
as a direct result of the announcement of the execution of this agreement (but
not excluding the effect of such actions on the business, assets (tangible or
intangible), liabilities, operations, condition (financial or otherwise),
results of operations or prospects of Company and its Subsidiaries either
individually or taken as a whole, or on the ability of Company to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis) or (D) impairment of Company's ability to finance
its operations, including as a result of a lowering of Company's credit ratings,
a reduction or elimination of a warehouse line of credit or actions taken by
lenders or guarantors (but not excluding the effect of any such impairment on
the business, assets (tangible or intangible), liabilities, operations,
condition (financial or otherwise), results of operations or prospects of
Company and its Subsidiaries either individually or taken as a whole, or on the
ability of Company to perform its obligations under and to consummate the
transactions contemplated by this Agreement on a timely basis); and (ii) the
term "SUBSIDIARY" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, (x) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership), or (y) a majority of the securities or other interests of
which having by their terms ordinary voting power to elect a majority of the
board of directors or other body performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries and (iii) the term "KNOWLEDGE" means,
when used with respect to Company, the actual knowledge, after due inquiry, of
any executive officer listed on Section 3.1(a) of the Company Disclosure
Schedule (as defined below). Section 3.1(a) of the Company disclosure schedule
delivered to Parent concurrently herewith (the "COMPANY DISCLOSURE SCHEDULE")
contains true and complete copies of the articles of incorporation and bylaws of
Company, as in effect as of the date of this Agreement. Such organizational
documents are in full force and effect and no other organizational documents are
applicable to or binding upon Company. Company is not in violation of any of the
provisions of its articles of incorporation or bylaws.
(b) Part I of Section 3.1(b) of the Company Disclosure Schedule sets forth a
complete and correct list of all of Company's Subsidiaries (each a "COMPANY
SUBSIDIARY" and collectively the "COMPANY SUBSIDIARIES") and indicates, as to
each such Subsidiary, the number and type of outstanding shares of capital stock
or other equity securities of each such Subsidiary, any issued and outstanding
options, warrants, stock appreciation rights, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock or other equity securities
of such Subsidiary, and any contracts, commitments, understandings or
arrangements by which such Subsidiary may become bound to issue additional
shares of its capital stock or other equity securities, or options, warrants,
scrip on rights to purchase, acquire, subscribe to, calls on or commitments for
any shares of its capital stock or other equity securities and the identity of
the parties to any such agreements or arrangements. All of the outstanding
shares of capital stock or other securities evidencing ownership of the Company
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable with no personal liability attaching to the ownership thereof and
such shares or other securities are owned by Company or its wholly-owned
Subsidiaries free and, except as set forth on Section 3.1(b) of the Company
Disclosure Schedule, clear of any lien, claim, charge, option, encumbrance,
mortgage, pledge or security interest (a "LIEN") with respect thereto. Each
Company Subsidiary (i) is a duly organized and validly existing corporation,
partnership or limited liability company or other legal entity under the laws of
its jurisdiction of organization, (ii) is duly licensed or qualified to do
business and in good standing in all jurisdictions
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(whether federal, state, local or foreign) where its ownership or leasing of
property or the conduct of its business requires it to be so qualified other
than in such jurisdictions where the failure so to qualify would not have,
individually or in the aggregate, a Material Adverse Effect on the Company and
(iii) has all requisite corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted. Except for
(i) the ownership interests set forth in Part II of Section 3.1(b) of the
Company Disclosure Schedule and (ii) the ownership interests in its Subsidiaries
disclosed in Part I of Section 3.1(b) of the Company Disclosure Schedule,
Company does not own, directly or indirectly, any capital stock or other
ownership interest, and does not have any option or similar right to acquire any
equity or other ownership interest. Part III of Section 3.1(b) of the Company
Disclosure Schedule provides a complete and accurate description of all
partnership, joint venture and similar investments held by Company or any
Company Subsidiary, including, without limitation, all such investments in which
any Company employee or affiliate serves as a director. Company has provided or
made available to Parent a complete and accurate copy of all such partnership,
joint venture or similar agreements to which Company or any Company Subsidiary
is a party. Except as set forth on Section 3.1(b) of the Company Disclosure
Schedule, neither Company nor any Company Subsidiary is subject to any
obligation or requirement to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any entity.
(c) Company has made available to Parent the minute books of Company, which
accurately reflect in all material respects all corporate meetings and actions
held or taken since January 1, 1996 by its shareholders and Board of Directors
(including committees of the Board of Directors of Company).
3.2 CAPITALIZATION. The authorized capital stock of Company consists of
55,000,000 shares of Company Common Stock, 90,000 shares of Class A Preferred
Stock, par value $0.01 per share ("CLASS A PREFERRED STOCK"), and 44,010,000
undesignated shares, par value $0.01 per share ("UNDESIGNATED STOCK"). As of
September 30, 1999, (i) 39,443,693 shares of Company Common Stock were issued
and outstanding, (ii) no shares of Company Common Stock were held in treasury,
(iii) no shares of Class A Preferred were issued or outstanding, (iv) 90,000
shares of Class A Preferred Stock were reserved for issuance upon the exercise
of the Company Rights and (v) 2,052,000 shares of Company Common Stock were
reserved for issuance upon the exercise of warrants to purchase 2,052,000 shares
of Company Common Stock ("COMPANY WARRANTS"). All of the issued and outstanding
shares of Company Common Stock have been duly authorized and validly issued and
are fully paid, non-assessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The shares of Company Common Stock
which are issuable upon exercise of Company Options or Company Warrants have
been duly authorized and reserved for issuance and, if and when issued pursuant
to the terms thereof, will be validly issued, fully paid and non-assessable and
free of preemptive rights, with no personal liability attaching to the ownership
thereof. As of the Effective Time, each Company Warrant shall become exercisable
for the amount of cash and number of RVOs which the holder of such Company
Warrant would have owned immediately after the Effective Time if such holder had
exercised such Company Warrant immediately prior to the Effective Time. Part I
of Section 3.2 of the Company Disclosure Schedule sets forth, in each case as of
September 30, 1999, (i) the number of shares of Company Common Stock that were
reserved for issuance upon the exercise of authorized but unissued stock options
pursuant to the Company Stock Plans, (ii) the number of shares of Company Common
Stock issuable upon the exercise of outstanding Company Options pursuant to the
Company Stock Plans and (iii) the number of shares of Company Common Stock that
were reserved for issuance under Company's restricted stock election plans and
Employee Stock Purchase Plan or otherwise. Part III of Section 3.2 of the
Company Disclosure Schedule sets forth a list, as of September 30, 1999, of the
holders of record of the Company Warrants the number of shares subject to each
such Company Warrant, the expiration date of each such Company Warrant and the
price at which each such Company Warrant may be exercised. Except as set forth
above in this Section 3.2 or in Part I or Part II of Section 3.2 of the Company
Disclosure Schedule, no other shares of Company Common Stock, capital stock or
other equity or voting securities of Company were
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outstanding or reserved for issuance. Part II of Section 3.2 of the Company
Disclosure Schedule sets forth a list, as of September 30, 1999, of the holders
of Company Options, the date of grant of each Company Option granted and
outstanding, the number of shares subject to each such option, the expiration
date of each such option, the vesting schedule of each such option and the price
at which each such option may be exercised under the applicable Company Stock
Plan or otherwise. Except as set forth in Part IV of Section 3.2 of the Company
Disclosure Schedule, since September 30, 1999, Company has not (i) issued any
shares of its capital stock or other equity or voting securities or any
securities convertible into or exercisable or exchangeable for any shares of its
capital stock or other equity or voting securities, other than shares of Company
Common Stock issued upon the exercise or conversion of Company Options
outstanding as of September 30, 1999 as described in the immediately preceding
sentence or (ii) taken any action which would cause an antidilution adjustment
under any outstanding options or warrants. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities (other than the
Company Options and the Company Warrants) of Company having the right to vote
(or convertible into, or exchangeable or exercisable for, securities having the
right to vote) on any matters on which shareholders of Company may vote. Except
as set forth above in this Section 3.2 and as set forth in Section 3.2 of the
Company's Disclosure Schedule, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which Company or any of its Subsidiaries is a party or by which
any of them is bound obligating Company or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other equity or voting securities of Company or of any of its
Subsidiaries or obligating Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations, commitments, understandings or arrangements of Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Company or any of its Subsidiaries. Except as set forth in
Part VI of Section 3.2 of the Company's Disclosure Schedule, there are no
agreements or arrangements pursuant to which Company is or could be required to
register shares of Company Common Stock or other securities under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), or other agreements or
arrangements with or among any securityholders of Company with respect to
securities of Company. Except as set forth in Part VII of Section 3.2 of the
Company Disclosure Schedule, there are no voting, sale, transfer or other
similar agreements to which Company or any of its Subsidiaries is a party with
respect to the capital stock of Company or its Subsidiaries or any other
securities of Company or its Subsidiaries which are convertible or exchangeable
into or exercisable for shares of the capital stock of Company or its
Subsidiaries. None of the shares of Company Common Stock are held, directly or
indirectly, by any of the Company Subsidiaries.
3.3 AUTHORITY; NO VIOLATION. (a) Company has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of Company, at a
meeting duly called and held, has unanimously (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger, are advisable
and fair to and in the best interests of the holders of shares of Company Common
Stock, (ii) duly approved and adopted a resolution containing this Agreement and
approved the execution and delivery of this Agreement and the transactions
contemplated hereby, including the Merger, and approved the execution and
performance of the Support Agreement and the Receivables Agreements and
(iii) resolved to recommend that the holders of shares of Company Common Stock
vote to approve and adopt this Agreement (the "COMPANY BOARD RECOMMENDATION"). A
committee of the Board of Directors of Company consisting of all of Company's
disinterested (as such term is defined in Subdivision 1(d)(3) of Section
302A.673 of the MBCA) directors of Company, formed in accordance with
Subdivision 1(d) of Section 302A.673 of the MBCA, duly approved the execution
and performance of this Agreement, the Support Agreement and the Receivables
Agreements and the transactions contemplated hereby and thereby. The Board of
Directors of Company has directed that this
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Agreement be submitted to Company's shareholders for approval at a meeting of
such shareholders and, except for the adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon in connection with the Merger (the
"COMPANY SHAREHOLDER APPROVAL"), no other corporate proceedings on the part of
Company or the Board of Directors of the Company and no other votes or consents
of any holders of Company securities are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Company and (assuming due authorization,
execution and delivery by Parent and Sub) constitutes the valid and binding
obligation of Company, enforceable against Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
(b) Except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement or the
Receivables Agreements by Company nor the consummation by Company of the
transactions contemplated hereby or thereby, nor compliance by Company with any
of the terms or provisions hereof or thereof, will (i) violate any provision of
the articles of incorporation or bylaws (or other constituent documents) of
Company or any Company Subsidiary or (ii) assuming that the consents and
approvals referred to in Section 3.4 are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Company or any of its Subsidiaries or any of their respective
properties or assets, or violate, conflict with, result in a breach of any
provision of or the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by or rights or obligations under, or result
in the creation of any Lien upon any of the respective properties or assets of
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, permit,
concession, franchise, license, lease, agreement, contract, pooling and
servicing agreement or other Securitization Agreement (as defined in Section
3.14) or other instrument or obligation to which Company or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets are bound, except as to (ii), for any such violations, conflicts,
breaches, losses, terminations, cancellations, accelerations or Liens that could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
3.4 CONSENTS AND APPROVALS. Except for (i) the filing of any required
applications or notices with governmental agencies or authorities as set forth
in Schedule 3.4 of the Company Disclosure Schedule and approval of such
applications and notices (the "REGULATORY APPROVALS"), (ii) the filing with the
SEC of the Form S-4 (as defined in Section 6.1(a)) containing the Proxy
Statement/Prospectus (as defined in Section 6.1(a)), (iii) the filing of the
Articles of Merger with the Secretary of State of the State of Minnesota
pursuant to the MBCA, (iv) the expiration of any applicable waiting period under
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (v) the Company Shareholder Approval, (vi) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as may be required in connection with the execution and
delivery of this Agreement and the transactions contemplated hereby and (vii)
such other consents, approvals, filings and registrations the failure to obtain
which would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect on Company, no consents or approvals of or
filings or registrations with any court, administrative agency or commission or
other governmental or regulatory authority or instrumentality (each a
"GOVERNMENTAL ENTITY"), are necessary in connection with the execution and
delivery by Company of this Agreement or the Receivables Agreements or the
consummation by Company of the transactions contemplated hereby or thereby.
Company has no reason to believe that any regulatory approvals or consents
required to consummate the transactions contemplated by this Agreement (the
"REQUISITE REGULATORY APPROVALS") will not be obtained on a timely basis.
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3.5 REGULATORY REPORTS. Company and each of its Subsidiaries have timely
filed all regulatory reports, schedules, forms, registrations and other
documents, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 1996 with (i) the
Securities and Exchange Commission (the "SEC"), (ii) any domestic or foreign
industry self-regulatory organization ("SRO") and (iii) any other federal, state
or foreign governmental or regulatory agency or authority (collectively with the
SEC and all SROs, "REGULATORY AGENCIES"), and have timely paid all taxes, fees
and assessments due and payable in connection therewith, except as to (ii) and
(iii), for such filings and payments that the failure to make, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Company. Except as disclosed in Section 3.5 of the Company Disclosure
Schedule and for normal examinations conducted by a Regulatory Agency in the
regular course of the business of Company and its Subsidiaries, no Regulatory
Agency has initiated any proceeding or, to the knowledge of Company,
investigation into the business or operations of Company or any of its
Subsidiaries since January 1, 1996. Except as set forth in Section 3.5 of the
Company Disclosure Schedule, there is no material unresolved violation or
exception by any Regulatory Agency with respect to any report or statement
relating to any examinations of Company or any of its Subsidiaries.
3.6 BROKER'S FEES; OPINION OF COMPANY FINANCIAL ADVISOR. (a) No broker,
finder or investment banker (other than X.X. Xxxxxx & Co. (the "COMPANY
FINANCIAL ADVISOR")) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
Company has attached as Section 3.6 of the Company Disclosure Schedule a
complete and correct copy of all agreements between Company and the Company
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated hereby.
(b) Company has received the oral opinion of the Company Financial Advisor
as of the date of this Agreement, to the effect that the Merger Consideration is
fair to the holders of the Company Common Stock from a financial point of view,
a signed copy of which opinion will be delivered to Parent.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. (a) Except as set forth on
Section 3.7 of the Company Disclosure Schedule, since September 30, 1999, no
event, change or circumstance has occurred which has had, or would reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect on Company.
(b) Except as set forth on Section 3.7 of the Company Disclosure Schedule,
since September 30, 1999, Company and its Subsidiaries have, in all material
respects, carried on their respective businesses only in the ordinary and usual
course consistent with their past practices.
(c) Except as disclosed in Section 3.7(c) of the Company Disclosure
Schedule, since September 30, 1999, there has not occurred any event which, if
it had taken place following the execution of this Agreement, would not have
been permitted by Section 5.2 without the prior consent of Parent.
3.8 LEGAL PROCEEDINGS. Except as set forth in Section 3.8 of the Company
Disclosure Schedule, there are no suits, actions, counterclaims, proceedings
(whether judicial, arbitral, administrative or other) or governmental, or
regulatory investigations pending or, to the knowledge of Company, threatened
against or affecting Company or any of its Subsidiaries that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Company. There is not any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Company or any of its
Subsidiaries having, or which individually or in the aggregate would reasonably
be expected to have, a Material Adverse Effect on Company.
3.9 TAXES AND TAX RETURNS. Except as set forth in Section 3.9 of the
Company Disclosure Schedule:
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(a) Company and each of its Subsidiaries, and any consolidated, combined,
unitary or aggregate group for tax purposes of which Company or any of its
Subsidiaries is or has been a member, has filed or will file all material Tax
Returns (as defined below) required to be filed by it in the manner provided by
law. If not yet filed, such Tax Returns will be filed within the time prescribed
by law (including extensions of time permitted by the appropriate Taxing
Authority, as defined below). All such Tax Returns are true, correct and
complete in all material respects. Company and each of its Subsidiaries has paid
or will pay on a timely basis all material Taxes (as defined below) whether or
not shown thereon to be due other than Taxes which (i) are being contested in
good faith, (ii) have not been finally determined and (iii) for which an
adequate reserve has been provided in accordance with GAAP. None of Company or
any of its Subsidiaries is aware of any investigation pending or threatened by
any Taxing Authority for any jurisdiction where the Company and its Subsidiaries
do not file Tax Returns with respect to a given Tax that may lead to an
assertion by such Taxing Authority that Company or any Subsidiary is or may be
subject to such Tax in such jurisdiction.
(b) There are no examinations, audits, actions, proceedings, investigations
or disputes pending, or claims asserted, for material Taxes upon Company or any
of its Subsidiaries. No closing agreements, private letter rulings, technical
advice memoranda or similar agreements or rulings have been entered into or
issued by any Taxing Authority with respect to Company or any of its
Subsidiaries that have an impact on any material Taxes for any taxable period
ending after the Closing Date.
(c) Proper and accurate amounts for all material Taxes have been withheld by
Company and its Subsidiaries in connection with amounts paid or owing to any
employee, officer, creditor, shareholder, independent contractor or other person
in compliance with the Tax withholding provisions of applicable federal, state
and local laws and have either been paid, remitted or deposited to or with the
appropriate Taxing Authorities, or, if not yet due, set aside in accounts for
such purposes and accrued on the books of Company or any Subsidiary as
applicable.
(d) There are no Tax liens upon any property or assets of Company or any of
its Subsidiaries except liens for Taxes not yet due and payable.
(e) None of Company and its Subsidiaries has filed a consent under section
341(f) of the Code (as defined below) concerning collapsible corporations. None
of Company and its Subsidiaries (i) has received approval to make or agreed to a
change in accounting method that would materially affect any taxable period of
Company or any of its Subsidiaries ending after the Closing Date, or (ii) has
any application pending with any Taxing Authority requesting permission for any
change in accounting method. None of Company and its Subsidiaries has been
required to include in income any adjustment pursuant to section 481 of the Code
(or any similar provision of state, local or foreign tax law) by reason of a
voluntary change in accounting method initiated by Company or any of its
Subsidiaries, and the IRS has not initiated or proposed any such adjustment or
change in accounting method.
(f) Neither Company nor any of its Subsidiaries (i) has been a member of an
affiliated group filing consolidated federal income tax return (other than a
group the common parent of which was Company), (ii) is a party to a Tax
allocation or Tax sharing agreement (other than an agreement solely among
members of a group the common parent of which is Company), or (iii) has any
liability for the Taxes of any person (other than any of Company or its
Subsidiaries) under Treasury Regulation section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(g) For the 1998 Tax year, the Company and its Subsidiaries reported a net
operating loss of $200, 162,111 on its U.S. federal income Tax Return. As of the
date hereof, and subject to matters raised as of the date hereof in any audits
disclosed in Section 3.9 of the Company Disclosure Schedule, the net operating
losses of the Company and its subsidiaries for U.S. federal income tax purposes
are not less than $180 million. Except as set forth in Section 3.9 of the
Company Disclosure Schedule, prior to the Closing Date, there has not been, and
there will not be, any change of ownership of Company or any
A-11
of its Subsidiaries within the meaning of Section 382 of the Code and the
Treasury Regulations thereunder or any limitation on the utilization of such net
operating losses under Treasury Regulation 1.1502-21 or Temporary Treasury
Regulation 1.1502-21T. To the extent such a change of ownership or such
limitation on the utilization of such net operating losses has or will occur
prior to the Closing Date, Section 3.9 of the Company Disclosure Schedule
accurately describes in reasonable detail the event(s) constituting such change
in ownership and such limitation on the utilization of such net operating
losses. As of September 30, 1999 the net deferred tax liability of Company and
the Subsidiaries (excluding any net operating loss carryforwards) was not
greater than $200,000,000.
For purposes of this Agreement, "CODE" shall mean the U.S. Internal Revenue
Code of 1986, as amended, or any successor law. For purposes of this Agreement,
"TAX" or "TAXES" shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts, capital,
sales, use, ad valorem, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign. For purposes of this Agreement, "TAXING AUTHORITY" shall
mean, with respect to any Tax, the government entity or political subdivision
thereof that imposes such Tax and the agency (if any) charged with the
collection of such Tax for such entity or subdivision. For purposes of this
Agreement, "TAX RETURN" shall mean any return, report or statement required to
be filed with any governmental authority with respect to Taxes, including any
schedule or attachment thereto or amendment thereof. For purposes of this
Agreement, "TREASURY REGULATIONS" shall mean the Treasury Regulations
promulgated under the Code.
3.10 EMPLOYEES. (a) Section 3.10(a) of the Company Disclosure Schedule
identifies each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder ("ERISA")) and each employment, severance or
similar contract or arrangement (whether or not written) and each plan, policy,
fund, program, contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock options, other stock related rights,
other forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, workers' compensation, supplemental unemployment benefits,
severance benefits, or post-employment or retirement benefits (i) for or
pursuant to which the Company, any of its Subsidiaries, or any entity which,
together with Company or any of its Subsidiaries, would be treated as a single
employer under Section 414 of the Code (each such entity, an "ERISA AFFILIATE")
has any current or contingent liability and (ii) that covers any current or
former employee, consultant, independent contractor or director of or with
respect to Company or any of its Subsidiaries (each, an "EMPLOYEE PLAN").
Company has furnished or made available to Parent accurate and complete copies
of the Employee Plans (or, to the extent no copy exists, an accurate description
thereof) (and, if applicable, related trust agreements), all amendments thereto,
all written interpretations thereof, as well as, with respect to each Employee
Plan (if applicable), (i) the two most recent annual reports (Form 5500 and
attached schedules), (ii) audited financial statements for the two most recent
years, (iii) actuarial valuation reports for the two most recent years,
(iv) nondiscrimination testing results for the two most recent years,
(v) contracts with third party administrators, and (vi) any summary plan
description and other written communications (or a description of any material
oral communications) by Company or its Subsidiaries to their employees
concerning the extent of the benefits provided under an Employee Plan.
(b) None of Company, any of its Subsidiaries or any ERISA Affiliate has at
any time (i) maintained or contributed to any plan subject to Title IV of ERISA
or Section 412 of the Code, (ii) been required to contribute to any
multi-employer plan (as defined in Section 3(37) of ERISA), or (iii) incurred
any current or projected liability or made promises or guarantees in respect of
the
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payment or funding of post-employment or post-retirement health, medical or life
insurance benefits for current, former or retired employees of Company or any of
its Subsidiaries, except, in the case of this clause (iii), (x) as required to
avoid an excise tax under Section 4980B of the Code, (y) except as required by
any other applicable federal state or local law or (z) as set forth in Section
3.10(b) of the Company Disclosure Schedule.
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service to be so
qualified; each trust created under any such Employee Plan has been determined
by the Internal Revenue Service to be exempt from tax under Section 501(a) of
the Code and no event has occurred, either by reason of any action or failure to
act, which could reasonably be expected to adversely affect the qualified status
of any such Employee Plan or trust. Company has provided Parent with the most
recent determination letter or application for determination letter from the
Internal Revenue Service relating to each such Employee Plan. Each Employee Plan
has been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code and has been
maintained in good standing with applicable regulatory authorities. No event has
occurred and no condition exists that would subject the Company or its
Subsidiaries, either directly or by reason of their affiliation with an ERISA
Affiliate, to any material tax, fine, lien, penalty or other liability imposed
by ERISA, the Code or other applicable laws, rules and regulations. No
"prohibited transaction" (as such term is defined in ERISA section 406 and Code
section 4975) has occurred with respect to any Employee Plan. The Company and
its Subsidiaries have timely made all contributions and timely paid all premiums
with respect to each Employee Plan as required by such Employee Plan, applicable
law, collective bargaining agreement or any other binding obligation.
(d) Except as set forth in Section 3.10(d) of the Company Disclosure
Schedule, there has been no amendment to, written interpretation of or
announcement (whether or not written) by Company or any of its Subsidiaries or
ERISA Affiliates relating to, or any change in employee participation or
coverage under, any Employee Plan that would increase materially the expense of
maintaining such Employee Plan above the level of the expense incurred in
respect thereof for the most recent fiscal year ended prior to the date hereof.
(e) Except as set forth in Section 3.10(e) of the Company Disclosure
Schedule, there is no contract, plan or arrangement (written or otherwise)
covering any employee or former employee of Company or any of its Subsidiaries
that, individually or collectively, obligates Company to make a payment of any
amount or provision of any benefit that would not be deductible pursuant to the
terms of Section 162 or 280G of the Code.
(f) No Employee Plan is maintained outside the jurisdiction of the United
States, or covers any employee residing or working outside the United States.
(g) Section 3.10(g) of the Company Disclosure Schedule specifies, on a plan
by plan basis, the unfunded liabilities, (for the purposes of GAAP) as of the
date of this Agreement, of each of the Employee Plans providing deferred
compensation.
(h) Neither Company nor any of its Subsidiaries is a party to any collective
bargaining or other labor union contracts or is the subject of any proceeding
asserting that it or any subsidiary has committed an unfair labor practice.
There is no pending or, to the knowledge of Company, threatened labor dispute
(other than an individual employee grievance), strike or work stoppage against
Company or any of its Subsidiaries which would interfere with the respective
business activities of Company or its Subsidiaries. There is no action, suit,
complaint, charge, arbitration, inquiry, proceeding, grievance or investigation
by or before any court, government agency, administrative agency or commission
brought by or on behalf of any employee, prospective employee, former employee,
retiree or other representative of Company's employees pending or, to the
knowledge of Company, threatened against Company or any of its Subsidiaries
other than any which would not, individually or in the aggregate,
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have a Material Adverse Effect on Company. Neither Company nor any of its
Subsidiaries is a party to or otherwise bound by, any consent, decree, or
citation by any government entity relating to employees or employment practices.
(i) Company and its Subsidiaries are in compliance with their obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 0000 (xxx
"XXXX XXX"). Except as set forth in Section 3.10(i) of the Company Disclosure
Schedule, the Subsidiaries have not effectuated a "mass layoff" or "plant
closing" (as defined under the WARN Act) affecting in whole or in part any site
of employment, facility, operating unit or employees of either Company or any of
its Subsidiaries.
3.11 SEC REPORTS. Company has made available to Parent an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule, form and definitive proxy statement filed since January 1, 1996 by
Company with the SEC pursuant to the Securities Act or the Exchange Act
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the "COMPANY REPORTS") and
(b) communication mailed by Company to its shareholders since January 1, 1996.
As of their respective dates of filing or mailing, as the case may be, each
Company Report and each such communication complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Company Report or communication, and as of such dates no such Company
Report or communication (including any and all financial statements included
therein) contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading. Section 3.11 of the Company Disclosure Schedule sets forth true
and correct copies of all communications (excluding Company Reports) between
Company, or any person on behalf of Company, on the one hand, and the SEC on the
other hand, in each case since January 1, 1996.
3.12 FINANCIAL STATEMENTS. Each of the consolidated financial statements
(including the notes thereto) included in the Company Reports complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP"), including, without
limitation, SFAS No. 125 (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC), applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Company
and its Subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended, except as otherwise
noted therein (subject, in the case of unaudited statements, to normal and
recurring immaterial year-end adjustments). The books and records of Company and
its Subsidiaries have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements. Company has made available to Parent true and correct copies of,
or excerpts from, the books and records of the Company from which the amount of
finance income receivable, and the cash flows related thereto, as set forth in
the Company Reports was calculated.
3.13 LICENSES; COMPLIANCE WITH APPLICABLE LAW. (a) Except as set forth in
Section 3.13 of the Company Disclosure Schedule, Company and its Subsidiaries
hold, and are in compliance with, all permits, licenses, variances, exemptions,
authorizations, orders and approvals ("PERMITS") of all Governmental Entities
necessary for the operation of their respective businesses, except to the extent
that the failure to so hold or comply with such Permits would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Company, and there are no proceedings pending or, to the knowledge of Company,
threatened or contemplated by any Governmental Entity seeking to terminate,
revoke or materially limit any such permit, license, exemption, order or
approval. To the extent Company or any of its Subsidiaries has not been in
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compliance with all Permits of all Governmental Entities necessary for the
operation of its business, such failure to be in compliance, alone or together
with all such other failures, could not reasonably be expected to have a
Material Adverse Affect on Company.
(b) Neither Company nor any of its Subsidiaries nor the conduct of any of
their respective businesses is in conflict with, or in default or violation of,
any statutes, laws, regulations, ordinances, Permits, rules, judgments, decrees
or arbitration awards of any Governmental Entity applicable to Company or any of
its Subsidiaries or by which its or any of their respective properties are bound
or affected, except for such conflicts, defaults or violations that could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect on Company.
3.14 CERTAIN CONTRACTS. Section 3.14 of the Company Disclosure Schedule
includes a list of each (i) contract, arrangement, commitment or understanding
with respect to the employment of any directors, executive officers or key
employees, or with any consultants (for purposes of this clause (i), other than
consultants for computer and information systems) involving the payment of
$100,000 or more per annum, (ii) contract, arrangement, commitment or
understanding which is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) that has not been filed as an exhibit
to a Company Report, (iii) contract, arrangement, commitment or understanding
which limits in any way the ability of Company or any of its Subsidiaries to
compete in any line of business, in any geographic area or with any person, or
which requires referrals of any business, (iv) contract, arrangement, commitment
or understanding with or to a labor union or guild (including any collective
bargaining agreement), (v) contract, arrangement, commitment or understanding
(including, without limitation, any Company Employee Plan but excluding options,
warrants and other securities identified in Section 3.2 or in Section 3.2 of the
Company Disclosure Schedule) any of the benefits of which will be paid or
increased, or the vesting of the benefits of which will be accelerated, by the
delivery of this Agreement or the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, (vi) contract, arrangement, commitment or understanding which would
prohibit or materially delay the consummation of any of the transactions
contemplated by this Agreement, (vii) loan agreement, indenture, mortgage,
pledge, conditional sale or title retention agreement, security agreement,
guaranty, standby letter of credit (to which Company or any of its Subsidiaries
is the responsible party), material equipment lease or lease purchase agreement
to which the Company or any of its Subsidiaries is a party or by which any of
them is bound, (viii) contract, arrangement, commitment or understanding to
which Company or any of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets are bound or effected entered into
in connection with the securitization by Company or any of its Subsidiaries of
receivables (including, without limitation, (A) contracts, arrangements,
commitments or understandings regarding credit support provided by Financial
Security Assurance Inc. ("FSA") and any modification agreement, waiver or
consent related thereto and (B) sale and servicing agreements) ("SECURITIZATION
AGREEMENTS"), (ix) contract, agreement, arrangement or understanding between any
affiliate of Company (other than any wholly-owned Subsidiary of Company), on the
one hand, and Company or any Subsidiary of Company, on the other hand, and (x)
any other contract, arrangement, commitment or understanding that is material to
the business, assets, liabilities, financial condition or results of operations
of Company and its Subsidiaries, taken as a whole (PROVIDED, that for purposes
of this clause (ix) any contract, arrangement, commitment or understanding
involving payments or receipts by Company or any of its Subsidiaries in excess
of $250,000 over the term thereof shall be deemed to be material). Company has
previously made available to Parent complete and accurate copies of all Company
Contracts (as defined below). Each contract, arrangement, commitment or
understanding of the type described in this Section 3.14, whether or not set
forth in Section 3.14 of the Company Disclosure Schedule, is referred to herein
as a "COMPANY CONTRACT". None of Company or any of its Subsidiaries is in
material breach of or default in the performance of its obligations under any
Company Contract, and no material breach or default, alleged breach or default
or event which would
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(with the passage of time, notice or both) constitute a material breach or
default thereunder by Company or any of its Subsidiaries (or, to the knowledge
of Company, any other party or obligor with respect thereto) has occurred, or as
a result of its performance will occur. To the extent that Company or any of its
Subsidiaries has been, since January 1, 1996, in material breach of or default
in performance of its obligations under any Company Contract, such breach or
default, together with all such other breaches or defaults, could not reasonably
be expected to have a Material Adverse Effect on Company. To the knowledge of
Company, each Company Contract is in full force and effect.
3.15 AGREEMENTS WITH REGULATORY AGENCIES. Neither Company nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive issued by, or is a
recipient of any supervisory letter from or has adopted any board resolutions at
the request of, any Regulatory Agency or other Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business (each,
whether or not set forth in the Company Disclosure Schedule, a "COMPANY
REGULATORY AGREEMENT"), nor has Company or any of its Subsidiaries been advised
since January 1, 1996 by any Regulatory Agency or other Governmental Entity that
it is considering issuing or requesting any such Company Regulatory Agreement.
3.16 INVESTMENT SECURITIES. Each of Company and its Subsidiaries has good
and marketable title to all investment securities held by it, free and clear of
any Lien, except to the extent such securities are pledged in the ordinary
course of business to secure obligations of Company or any of its Subsidiaries.
Such investment securities are valued on the books of Company in accordance with
GAAP.
3.17 INTEREST RATE RISK MANAGEMENT INSTRUMENTS. Section 3.17 of the
Company Disclosure Schedule sets forth the notional amount and fair value of
each interest rate swap, cap, floor and option agreement and other interest rate
risk management arrangement, and such instruments, whether entered into for the
account of Company or one of its Subsidiaries, were entered into in the ordinary
course of business and with counterparties reasonably believed by Company to be
financially responsible at the time and are legal, valid and binding obligations
of Company or one of its Subsidiaries enforceable in accordance with their terms
(except as may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the rights of creditors generally and the availability
of equitable remedies), and are in full force and effect. Company and each of
its Subsidiaries have duly performed in all material respects all of their
material obligations thereunder to the extent that such obligations to perform
have accrued, and, to Company's knowledge, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
3.18 UNDISCLOSED LIABILITIES. Except for (i) those liabilities that are
fully reflected or reserved for in the consolidated balance sheet of Company
included in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, as filed with the SEC, (ii) liabilities disclosed in Section
3.18 of the Company Disclosure Schedule and (iii) liabilities incurred (A) in
the ordinary course of business consistent with past practice, and (B) outside
the ordinary course not in excess, in the aggregate, of $50,000, at
September 30, 1999, neither Company nor any of its Subsidiaries had, and since
such date none of them has incurred, any liabilities or obligations of any
nature whatsoever (whether accrued, absolute, contingent or otherwise and
whether or not required to be reflected in Company's financial statements in
accordance with GAAP).
3.19 ENVIRONMENTAL LIABILITY. There are no legal, administrative, arbitral
or other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that could reasonably result in the imposition, on
Company or any of its Subsidiaries of any material liability or obligation
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arising under common law or under any local, state or federal environmental
statute, regulation or ordinance relating to the protection of the environment
or human health including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("Environmental
Laws"), pending or, to Company's knowledge, threatened against Company or any of
its Subsidiaries. To the knowledge of Company, there is no reasonable basis for
any such proceeding, claim, action or governmental investigation that would
impose any material liability or obligation. Company is, and has been, in
compliance with applicable Environmental Laws in all material respects. Wastes
or other materials regulated under, or that could result in material liability
under, Environmental Laws, including without limitation petroleum and petroleum
products, asbestos, and polychlorinated biphenyls, have not been generated,
transported, treated, stored, disposed of, arranged to be disposed of, released
or threatened to be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used by the Company
in violation of, or in a manner or to a location that could reasonably be
expected to give rise to material liability to Company under or relating to, any
Environmental Laws.
3.20 INFORMATION SUPPLIED. None of the information supplied by Company for
inclusion or incorporation by reference in the Form S-4, containing the Proxy
Statement/Prospectus to be sent to the shareholders of Company in connection
with the Company Shareholders Meeting (as defined in Section 6.1(a)), will, at
the date it is first mailed to Company's shareholders or at the time of the
Company Shareholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading except that no representation is made by Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent or Sub in writing for inclusion in such document.
The Form S-4 and Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder. Company shall promptly
inform Parent of the discovery of any information which should be set forth in a
supplement to the Form S-4, containing the Proxy Statement/Prospectus.
3.21 INSURANCE. Company and its Subsidiaries maintain insurance policies
and performance bonds on their respective properties and assets, and with
respect to their employees and operations, with reputable insurance carriers,
and such insurance policies and bonds are identified in Section 3.21 of the
Company Disclosure Schedule. Company and its Subsidiaries are not in material
default under any of their insurance policies and have paid all premiums owed
thereunder, and no material claims for coverage thereunder have been denied.
3.22 YEAR 2000 COMPLIANCE. Except as would not, individually or the
aggregate, have a Material Adverse Effect on Company, all computer hardware,
software, databases, systems and other computer equipment (collectively,
"SOFTWARE") owned, held and/or used by Company or any Company Subsidiary can be
used prior to, during and after the calendar year 2000, and will operate during
each such time period, either on a stand-alone basis, or by interacting or
interoperating with year 2000 compliant third-party Software without error
relating to the processing, calculating, comparing, sequencing or other use of
correctly inputted data.
3.23 INTELLECTUAL PROPERTY. Company and its Subsidiaries own or have a
valid license to use all trademarks, trade names, service marks, copyrights,
patents, trade secrets and other intellectual property (collectively,
"INTELLECTUAL PROPERTY") that are material to the conduct of their business. All
applications, registrations and patents for such Intellectual Property owned,
used or licensed by the Company are identified in Section 3.23 of the Company
Disclosure Schedule. Except as set forth in Section 3.23 of the Company
Disclosure Schedule, neither Company nor any of its Subsidiaries is bound by or
subject to any license or other agreement with respect to any such Intellectual
Property (including, without limitation, the rights to the name "Arcadia" and
any variations thereof). Neither Company nor any of its Subsidiaries has
received any notice or other communication alleging that its usage of such
Intellectual Property violates the intellectual property rights of any other
person.
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3.24 RIGHTS AGREEMENT. The Board of Directors of Company has approved an
amendment to the Rights Agreement, dated as of November 1, 1996, as amended (the
"COMPANY RIGHTS AGREEMENT"), between Company and Norwest Bank Minnesota, N.A.,
to the effect that neither Parent, Sub nor any of their affiliates shall become
an "Acquiring Person", that no "Stock Acquisition Date", "Distribution Date", or
"Triggering Event" (as such terms are defined in the Company Rights Agreement)
will occur pursuant to the Company Rights Agreement by reason of, and the Rights
Agreement shall not be applicable to, the approval, execution or delivery of
this Agreement or the consummation of the transactions contemplated hereby, and
will cause the trustee under the Company Rights Agreement to execute such
amendment as of the date hereof.
3.25 STATE ANTI-TAKEOVER STATUTES. The restrictions contained in Sections
302A.671, 302A.673 and 302A.675 of the MBCA are inapplicable to this Agreement,
the Support Agreement, the Receivables Agreements and the transactions
contemplated hereby and thereby. No provision of Company's articles of
incorporation, bylaws or other governing instruments of Company or any of its
Subsidiaries would restrict or impair the ability of Parent to vote, or
otherwise exercise the rights of a shareholder with respect to, shares of
Company or any of its Subsidiaries.
3.26 PROPERTIES. (a) (i) None of Company or its Subsidiaries owns any real
property.
(b) Pursuant to the leases and subleases (the "REAL PROPERTY LEASES") of
Company and its Subsidiaries with respect to all material real property which is
leased or subleased by Company or its Subsidiaries (the "LEASED REAL PROPERTY"),
Company and its Subsidiaries hold good and valid leasehold title to the Leased
Real Property, in each case in accordance with the provisions of the applicable
Real Property Lease and free of all Liens, in each case except, individually or
in the aggregate, as would not have a Material Adverse Effect on Company. Each
of the Real Property Leases is enforceable against Company or its Subsidiary, as
the case may be, and, to the knowledge of Company, against the other party
thereto, in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law) and except
for such failures to be enforceable as would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
3.27 RECEIVABLES. Except as would not, individually or in the aggregate,
have a Material Adverse Effect on Company, (a) Company or any trust to which
Company has transferred title of any Receivables has good title and original
documents evidencing the Receivables, free and clear of any Liens; no person,
firm, corporation or association has any claim whatsoever to any such
Receivables. For purposes of this Section 3.27, "RECEIVABLE" means any
receivable owned by Company or any of its Subsidiaries or securitized pursuant
to any securitization transaction entered into by, or for the benefit of,
Company or any of its Subsidiaries.
(b) There exists a file pertaining to each Receivable, and such file
contains (i) a fully executed original of the Receivable, (ii) a certificate of
insurance, application form for insurance signed by the obligor under such
Receivable (the "OBLIGOR"), or a signed representation letter from the Obligor
named in the Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related financial vehicle, or copies thereof,
(iii) the original certificate of title, lien card or application therefor and
(iv) a credit application signed by the Obligor, or a copy thereof. The records
of Company maintained in electronic format and provided to Parent relating to
the Receivables of Company as of September 30, 1999 accurately reflect the
information purported to be reflected therein.
(c) Company is not a party to and there is no pending or, to Company's
knowledge, threatened litigation, legal or administrative proceeding, or
otherwise.
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(d) Each Receivable is genuine, valid and complete in all respects and is
enforceable in accordance with its terms, except as its enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws affecting the
rights of creditors.
(e) As of the closing date of each securitization transaction entered into
by, or for the benefit of, Company or any of its Subsidiaries, each motor
vehicle that is security for a Receivable was covered by a comprehensive and
collision insurance policy (i) in an amount at least equal to the lesser of
(A) its maximum insurable value or (B) the principal amount due from the Obligor
under the related Receivable, (ii) naming Company as loss payee and
(iii) insuring against loss and damage due to fire, transportation, collision
and other risks generally covered by comprehensive and collision coverage. Each
Receivable requires the Obligor to maintain physical loss and damage insurance
naming Company and its successors and assigns as additional insured parties, and
each Receivable permits the holder thereof to obtain physical loss and damage
insurance at the expense of the Obligor if the Obligor fails to do so. No such
motor vehicle was or had previously been insured under a policy of force-placed
insurance on any such closing date.
(f) The collateral for each of the Receivables that is secured is the
collateral described in the applicable security agreement or other security
document. Each security interest in titled personal property collateral
constitutes a valid, enforceable and perfected purchase money first lien on the
collateral described in the Receivable file.
(g) Each Receivable was originated, has been serviced and currently complies
in all material respects with all applicable state, federal and local laws and
regulations, including but not limited to all consumer protection and insurance
laws, the Truth-In-Lending Act, ECOA, RESPA and the FCRA.
(h) Company has paid or caused to be paid any and all licenses, franchise,
business privilege use, intangible stamp or other Taxes or fees due and owing,
if any, arising from the acquisition, origination, collection or holding of each
Receivable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and, with respect to Sections 4.1 and 4.2, Sub hereby represent and
warrant to Company as follows:
4.1 CORPORATE ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Minnesota. Each of Parent and Sub has all requisite
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business and in good standing in each jurisdiction in which
the nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
(individually or in the aggregate) would not reasonably be expected to have a
material adverse effect on the ability of Parent or Sub to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis.
4.2 AUTHORITY; NO VIOLATION. (a) Each of Parent and Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of each of
Parent and Sub and by Parent in its capacity as sole shareholder of Sub. No
other corporate proceedings on the part of Parent or Sub and no other votes or
consents of any holders of Parent
A-19
securities are necessary on the part of Parent or Sub to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Parent and Sub and (assuming
due authorization, execution and delivery by Company) constitutes the valid and
binding obligations of Parent and Sub, enforceable against each of them in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, and general equitable
principles (whether considered in a proceeding in equity or at law).
(b) Neither the execution and delivery of this Agreement by Parent or Sub
nor the consummation by Parent or Sub of the transactions contemplated hereby,
nor compliance by Parent or Sub with any of the terms or provisions hereof, nor
the execution and delivery of the Receivables Agreements by the affiliate of
Company party thereto, nor the consummation by such affiliate of the
transactions contemplated thereby, nor compliance by such affiliate with any of
the terms or provisions thereof, will (i) violate any provision of the
certificate or articles of incorporation or bylaws of Parent or Sub, as
applicable, or (ii) assuming that the consents and approvals referred to in
Section 4.3 are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Parent or
any of its material Subsidiaries or any of their respective properties or
assets, or violate, conflict with, result in a breach of any provision of or the
loss of any benefit under, constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by or rights or obligations under, or result in the
creation of any Lien upon any of the respective properties or assets of Parent
or any of its material Subsidiaries under, any of the terms, conditions or
provisions of any material note, bond, mortgage, indenture, deed of trust,
permit, concession, franchise, license, lease, agreement, contract, or other
instrument or obligation to which Parent or any of its material Subsidiaries is
a party, or by which they or any of their respective properties, assets or
business activities may be bound or affected, except (in the case of clause
(ii) above) for such violations, conflicts, breaches or defaults which, either
individually or in the aggregate, would not reasonably be expected to result in
a material adverse effect on the ability of Parent or Sub to perform its
obligations under and to consummate the transactions contemplated by this
Agreement on a timely basis.
4.3 CONSENTS AND APPROVALS. Except for (i) the Regulatory Approvals,
(ii) the filing with the SEC of the Form S-4 containing the Proxy
Statement/Prospectus, (iii) the filing of the Articles of Merger with the
Secretary of State of the State of Minnesota pursuant to the MBCA, (iv) the
expiration of any applicable waiting period under the HSR Act, (v) the Company
Shareholder Approval, (vi) the filing with the SEC of such reports under the
Exchange Act as may be required in connection with the execution and delivery of
this Agreement and the transactions contemplated hereby and (vii) such other
consents, approvals and registrations the failure to obtain which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Parent or Sub to perform its obligations under
and to consummate the transactions contemplated by this Agreement on a timely
basis, no consents or approvals of or filings or registrations with any
Governmental Entity, or of or with any third party, are necessary in connection
with the execution and delivery by Parent of this Agreement or the consummation
by Parent of the transactions contemplated by this Agreement or in connection
with the execution and delivery by the affiliate of Parent party thereto of the
Receivables Agreements or the consummation by such affiliate of the transactions
contemplated thereby. Parent has no reason to believe that any Requisite
Regulatory Approvals will not be obtained on a timely basis.
4.4 BROKER'S FEES. Parent has not engaged any broker, finder or investment
banker (other than Xxxxxxx, Xxxxx & Co., whose fee shall be paid by Parent) that
would be entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement.
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4.5 FUNDS. Either Parent or Sub has, or will have prior to the
consummation of the Merger, sufficient funds available to satisfy the obligation
to pay the Cash Consideration in the Merger.
4.6 INFORMATION SUPPLIED. None of the information supplied by Parent for
inclusion or incorporation by reference in the Form S-4 containing the Proxy
Statement/Prospectus to be sent to the shareholders of Company in connection
with the Company Shareholders Meeting, will not, at the date it is first mailed
to Company's shareholders or at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
except that no representation is made by Parent with respect to statements made
or incorporated by reference therein based on information supplied by Company
for inclusion or incorporation by reference in such document. The Form S-4 and
the Proxy Statement/ Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 CONDUCT OF COMPANY BUSINESSES PRIOR TO THE EFFECTIVE TIME. During the
period from the date of this Agreement to the Effective Time, except as
expressly required or permitted by this Agreement, Company shall, and shall
cause each of its Subsidiaries to, (a) conduct its business in the usual,
regular and ordinary course consistent with past practice and in compliance in
all respects with applicable laws, (b) use reasonable efforts to maintain and
preserve intact its business organization, employees and business relationships
and retain the services of its key officers and key employees and (c) take no
action which would adversely affect or delay in any respect the ability of
either Parent or Company to obtain any necessary approvals of any Regulatory
Agency or other Governmental Entity required for the transactions contemplated
hereby or to perform its covenants and agreements under this Agreement.
5.2 FORBEARANCES OF COMPANY. During the period from the date of this
Agreement to the Effective Time, except as set forth in Section 5.2 of the
Company Disclosure Schedule and except as expressly required or permitted by
this Agreement, Company shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Parent (which consent, in the case of
clause (h) below, shall not be unreasonably withheld):
(a) (i) incur any indebtedness for borrowed money (other than
(A) short-term indebtedness incurred (x) to refinance existing short-term
indebtedness or (y) pursuant to lines of credit and credit facilities existing
on the date of this agreement and (B) indebtedness of Company or any of its
Subsidiaries owed to Company or any of its other wholly-owned Subsidiaries and
(C) indebtedness in the aggregate not in excess of $20,000,000 incurred pursuant
to that Indenture, dated as of July 1, 1994, as amended and restated by a First
Amendment and Restatement, dated as of April 28, 1995, between Company and
Norwest Bank Minnesota, N.A., as trustee, as amended, provided that any
indebtedness incurred pursuant to this clause (C) shall be prepayable without
premium on at least 30 but not more than 60 days' notice to the holders
thereof), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other individual, corporation or other
entity, or make any loan, advance or capital contribution (other than to Company
or any of its wholly-owned Subsidiaries) or (ii) make or commit to make any
capital expenditures in excess of $50,000 for any single or related group of
capital expenditures, or $500,000 in the aggregate for all capital expenditures;
(b) (i) adjust, split, combine or reclassify any of its capital stock;
(ii) make, declare, set aside or pay any dividend (except for dividends paid in
the ordinary course of business by any wholly-owned Subsidiaries of Company to
Company or to any other of its wholly-owned Subsidiaries) or make any
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other distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock;
(iii) grant any individual, corporation or other entity any right to acquire any
shares of its capital stock or any stock appreciation or similar rights except
as permitted by Section 5.2(i); (iv) issue or authorize the issuance of,
deliver, sell, transfer, pledge or otherwise encumber any additional shares of
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, other than the issuance of Company Common
Stock pursuant to the exercise of stock options or warrants disclosed in
Section 3.2 of the Company Disclosure Schedule as being outstanding on the date
of this Agreement and granted pursuant to the Company Stock Plans; or (v) enter
into any agreement, understanding or arrangement with respect to the sale or
voting of its capital stock;
(c) (i) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets, including, without limitation, capital stock in any
Company Subsidiary, to any individual, corporation or other entity other than a
direct or indirect wholly-owned Subsidiary, or cancel, release or assign any
indebtedness to any such person or any claims held by any such person, except in
the ordinary course of business consistent with past practice or pursuant to
contractual requirements under contracts existing on the date of this Agreement
and identified in Section 3.14 of the Company Disclosure Schedule; or
(ii) securitize or otherwise dispose of any receivables owned by, or loans owed
to, Company or any of its Subsidiaries, except for sales or other dispositions
of receivables or any such loans to Parent or any of its Subsidiaries; provided,
however, that Company may securitize receivables owned by, or loans owed to,
Company or any of its Subsidiaries under the following conditions: (i) if Parent
is in material default of its obligations under the Receivables Agreements,
Company may securitize up to a maximum of $150 million a month in amount (as
reflected on the books and records of the Company) of receivables owned by, or
loans owed to, Company or any of its Subsidiaries and (ii) for so long as
Company is not in default under the Purchase Agreement in any material respect,
Company may securitize or otherwise dispose of receivables owned by, or loans
owed to, Company or any of its Subsidiaries in the amount of the principal
amount of Retail Installment Sales Contracts (as defined in the Purchase
Agreement) which Seller has available for sale, and which Buyer has the right to
purchase, under the Purchase Agreement and which up to a maximum of
$150 million a month in amount (as reflected on the books and records of the
Company) of Buyer has elected not to purchase.
(d) make any material investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other individual, corporation, limited partnership or other
entity, other than an investment in a wholly-owned Subsidiary of Company;
(e) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division thereof;
(f) acquire or agree to acquire voting or non-voting equity securities or
similar ownership interests in any person (other than a Subsidiary);
(g) commence, undertake or engage in any new line of business;
(h) enter into any contract, arrangement, commitment or understanding of the
types described in clause (iii), (v) or (vi) of Section 3.14; make any change in
or terminate any of its existing contracts, arrangements, commitments or
understandings disclosed pursuant to Section 3.14; or enter into any contract,
agreement, arrangement or understanding involving payments or receipts by
Company or any of its Subsidiaries in excess of $100,000 over the term thereof;
(i) (i) increase or accelerate the compensation or benefits of any present
or former director, officer, consultant, independent contractor or employee of
Company or its Subsidiaries (except for increases in salary or wages in the
ordinary course of business consistent with past practice for persons other than
those subject to an employment agreement with Company); provided, however, that
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(A) Company may accelerate the vesting of previously granted restricted shares
attributable to fiscal 1999 to Company officers and employees pursuant to
Company's 1998-2000 Restricted Stock Election Plan as in effect on the date of
this Agreement; (B) Company may commit to pay cash bonuses to the persons and in
the amounts set forth in Part I of Section 5.2(i) of the Company Disclosure
Schedule, provided, in the case of any such person, such person (x) is employed
by Company on the 60th day following the Effective Time, (y) is, following the
Effective Time and prior to such 60th day, terminated without cause (as defined
below) or (z) following the Effective Time and prior to such 60th day terminates
his or her employment for good reason (as defined below); (C) Company may pay
the bonuses to the persons and in the amounts set forth in Part II of Section
5.2(i) of the Company Disclosure and (D) Company may pay bonuses to persons
other than those identified in Part II of Section 5.2(i) of the Company
Disclosure Schedule in an aggregate amount not to exceed $7 million pursuant to
Company's bonus and incentive policies in effect on the date hereof, (ii) grant
any severance or termination pay to any present or former director, officer,
consultant, independent contractor or employee of Company or its Subsidiaries
other than as provided under an Employee Plan in existence as of the date of
this Agreement and identified in Section 3.10(a) or 3.14, as the case may be, of
the Company Disclosure Schedule, (iii) loan or advance any money or other
property to any present or former director, officer, consultant, independent
contractor or employee of Company or its Subsidiaries (iv) establish, adopt,
enter into, amend or terminate any Employee Plan or any plan, agreement,
program, policy, trust, fund or other arrangement that would be an Employee Plan
if it were in existence as of the date of this Agreement or (v) amend any term
of a Company Option, except in accordance with Section 1.6 hereof. For purposes
of Section 5.2(i)(A)(Y), a person may be terminated for "CAUSE" upon his or her
(i) substantial failure to perform duties, which failure is not cured within 10
business days following written notice, (ii) commission of a (x) felony or (y)
crime involving moral turpitude, (iii) malfeasance or misconduct which is
injurious to the Surviving Corporation or (iv) breach of the material terms of
his or her employment, including without limitation any non-compete,
non-solicitation or confidentiality obligations; PROVIDED, HOWEVER, that if such
person is subject to an employment agreement with the Company, and such
agreement includes a definition of cause, such definition will supercede the
foregoing definition. For purposes of Section 5.2(i)(A)(Z), a person may
terminate employment for "GOOD REASON" upon (i) a failure of Parent to pay
compensation or benefits when due to such person, (ii) a reduction of such
person's base salary or a failure of Parent to provide employee benefits in
accordance with Section 6.4 hereof, (iii) a relocation of such person's
principal place of employment by more that 35 miles from his or her current
principal place of employment or (iv) a substantial change in such person's
duties, other than as a result of poor job performance; PROVIDED, HOWEVER, that
it shall only be good reason if, in each case, Parent does not cure such good
reason within 10 business days following the Parent's receipt of written notice
from such person of the acts or omissions alleged to be good reason; PROVIDED,
FURTHER, that if such person is subject to an employment agreement with the
Company, and such agreement includes a definition of good reason, such
definition will supercede the foregoing definition.
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
the payment, discharge or satisfaction of (i) current liabilities or
obligations, in accordance with their terms, in the ordinary course of business
consistent with past practice and (ii) liabilities disclosed pursuant to this
agreement and the schedules hereto, to the extent required by their terms, or
waive, release, grant, or transfer any rights of value or modify or change any
existing license, lease, contract or other document in any manner that would be
material to Company and its Subsidiaries;
(k) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement), other than settlements or compromises of litigation
where the amount paid does not exceed $50,000 for any single litigation matter
or related group of litigation matters (provided such settlement or compromise
agreements do not involve any non-monetary obligations on the part of Company or
any of its Subsidiaries);
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(l) (i) change any accounting principle used by it (including, without
limitation, any assumptions used for purposes of computing finance income
receivable), except for such changes as may be required to be implemented
following the date of this Agreement pursuant to generally accepted accounting
principles or rules and regulations of the SEC promulgated following the date
hereof, as concurred in by Company's independent auditors; or (ii) materially
change or amend Company's underwriting, servicing or collection policies,
procedures or standards;
(m) change any material Tax election, change any annual Tax accounting
period, change any material method of Tax accounting, file any amended Tax
Return, enter into any closing agreement relating to any material Tax, settle
any material Tax claim or assessment, surrender any right to claim a material
Tax refund or consent to any extension or waiver of the limitations period
applicable to any material Tax claim or assessment;
(n) adopt or implement any amendment to its articles of incorporation or
bylaws or other comparable organizational documents, or enter into any plan of
consolidation, merger or reorganization with any person other than a
wholly-owned Subsidiary of Company;
(o) materially restructure or materially change its investment securities
portfolio, its hedging strategy or its gap position, through purchases, sales or
otherwise, or the manner in which the portfolio is classified or reported or
materially alter the credit or risk concentrations associated with its
businesses; or repurchase any receivables disposed of by Company or any of its
Subsidiaries in connection with any Securitization Transaction;
(p) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such a liquidation or a dissolution, restructuring,
recapitalization or reorganization;
(q) take any action that is intended or may reasonably be expected to result
in any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect, or in any of the conditions to the
Merger set forth in Article VIII not being satisfied or in a violation of any
provision of this Agreement, except, in each case, as may be required by
applicable law; or
(r) agree to, or make any commitment to, take, or authorize, any of the
actions prohibited by this Section 5.2.
5.3 TRANSITION. In order to facilitate an orderly transition of the
management of the business of Company and its Subsidiaries to Parent and in
order to facilitate the integration of the operations of Company and Parent and
their Subsidiaries and to permit the coordination of their related operations on
a timely basis, and in an effort to accelerate to the earliest time possible
following the Effective Time the realization of synergies, operating
efficiencies and other benefits expected to be realized by Parent and Company as
a result of the Merger, on and after the earlier of (i) the 45th day after the
date of this Agreement and (ii) the day, if any, on which Parent waives its
right to terminate this Agreement pursuant to Section 8.1(d)(vi) (the date of
the earlier of such days, the "ACCESS DATE"), Company shall and shall cause its
Subsidiaries to consult with Parent on all strategic and operational matters to
the extent such consultation is not in violation of applicable laws, including
laws regarding the exchange of information and other laws regarding competition.
Without in any way limiting the provisions of Section 6.3, Parent, its
Subsidiaries, officers, employees, counsel, financial advisors and other
representatives shall on and after the Access Date, upon reasonable notice to
Company and subject to applicable laws relating to the exchange of information,
be entitled to review the operations and visit the facilities of Company and its
Subsidiaries at all times as may be deemed reasonably necessary by Parent in
order to accomplish the foregoing arrangements (provided such access does not,
in Company's reasonable opinion, unreasonably interfere with Company's business
options). Notwithstanding the foregoing, nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct
Company's operations prior to the Effective Time. Prior to the
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Effective Time, each of Company and Parent shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its and its Subsidiaries' respective operations.
5.4 NOTIFICATION OF TAX PROCEEDINGS. From the date of this Agreement to
the Effective Time, to the extent Company or any Subsidiary becomes aware of the
commencement or scheduling of any Tax audit, the assessment of any material Tax,
the issuance of any notice of material Tax due or any xxxx for collection of any
material Tax due or any material lien for Taxes, or the commencement or
scheduling of any other administrative or judicial proceeding with respect to
the determination, assessment, or collection of any material Tax on Company or
any Subsidiary, Company shall provide prompt notice to Parent of such matter
setting forth information (to the extent known) describing any asserted Tax
liability in reasonable detail and including copies of any notice or other
documentation received from the applicable Tax Authority with respect of the
matter.
5.5 TRANSFER TAXES. All Transfer Taxes imposed on Company or Parent or any
of their affiliates in connection with this Agreement shall be paid by Parent.
For this purpose, "Transfer Taxes" means any Stock transfer taxes, real property
transfer, transfer gains or similar taxes (including without limitation, any New
York State Real Estate Transfer Tax) payable in connection with this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 COMPANY SHAREHOLDERS MEETING; PREPARATION OF PROXY STATEMENT. Company
shall cause a meeting of its shareholders (the "COMPANY SHAREHOLDERS MEETING")
to be duly called and held as soon as practicable after the date hereof for the
purpose of approving the adoption of this Agreement. As promptly as practicable
following the date hereof, Parent and Company shall prepare and file with the
SEC preliminary proxy materials which shall constitute the Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments
thereto, the "PROXY STATEMENT/PROSPECTUS") and Parent shall prepare and file
with the SEC a registration statement on Form S-4 with respect to the issuance
of the RVOs in the Merger (the "FORM S-4"). The Proxy Statement/Prospectus will
be included in the Form S-4 as Parent's prospectus. The Form S-4 and the Proxy
Statement/Prospectus shall comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations of the SEC thereunder. Each of Parent and Company shall
use its reasonable best efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after filing with the SEC and to
keep the Form S-4 effective as long as is necessary to consummate the Merger.
Parent and Company shall, as promptly as possible after receipt thereof, provide
copies of any written comments received from the SEC with respect to the Proxy
Statement/Prospectus to the other party and advise the other party of any oral
comments with respect to the Proxy Statement/Prospectus received from the SEC.
Company shall use its reasonable best efforts to cause the Proxy
Statement/Prospectus to be mailed to Company's shareholders as promptly as
practicable after the FormS-4 is declared effective under the Securities Act.
Each of Company and Parent will inform the other party, promptly after it
receives notice thereof, of any request by the SEC for an amendment to the
Form S-4 or the Proxy Statement/ Prospectus, as the case may be, or requests for
additional information. No amendment or supplement to the Form S-4 or the Proxy
Statement/Prospectus shall be filed without the approval of both parties, which
approvals shall not be unreasonably withheld or delayed. The Board of Directors
of Company shall (i) include in the Proxy Statement/Prospectus (x) the Company
Board Recommendation unless based on the advice of Company's outside counsel,
the Board of Directors of Company determines in good faith that inclusion of
such recommendation would constitute a breach by the Board of Directors of
Company of its fiduciary duties under applicable law and (y) the opinion of the
Company Financial Advisor referred to in Section 3.6(b) and (ii) use its
reasonable best efforts to obtain the necessary vote in favor of the adoption of
this Agreement by its shareholders. The Board of Directors of Company
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shall not withdraw, amend, modify or materially qualify in a manner adverse to
Parent the Company Board Recommendation (or announce publicly its intention to
do so) unless based on the advice of Company's outside counsel, the Board of
Directors of Company determines in good faith that failure to do so would
constitute a breach by Board of Directors of Company of its fiduciary duties
under applicable law. Subject to its right to terminate this Agreement in
accordance with the terms hereof, Company shall be required to satisfy all its
obligations under this Agreement, including, without limitation, its obligations
under this Section 6.1(a), whether or not the Board of Directors of Company
shall have withdrawn, amended, modified or qualified in a manner adverse to
Parent the Company Board Recommendation or announced publicly its intention to
do so.
6.2 REASONABLE BEST EFFORTS. (a) Each of Parent and Company shall, and
shall cause their respective Subsidiaries to, use their reasonable best efforts
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or any of its Subsidiaries with respect to the Merger and, subject to the
conditions set forth in Article VII hereof, to consummate the transactions
contemplated by this Agreement.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
identify and obtain as promptly as practicable all permits, consents, approvals
and authorizations of all Governmental Entities and any other third parties
which are necessary or advisable to consummate the transactions contemplated by
this Agreement (including, without limitation, the Merger), and to comply fully
with the terms and conditions of all such permits, consents, approvals and
authorizations of all such Governmental Entities. Without limiting the
generality of the foregoing, within 20 days of the date of this Agreement,
Company shall deliver to Parent a schedule setting forth in reasonable detail
those third party consents, approvals and filings which are necessary to
consummate the transactions contemplated by this Agreement. Parent and Company
shall have the right to review in advance, and, to the extent practicable, each
will consult with the other on, in each case subject to applicable laws relating
to the exchange of information, all the information relating to Company or
Parent, as the case may be, and any of their respective Subsidiaries, which
appear in any filing made with, or written materials submitted to, any
Governmental Entity or any other third party in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
Governmental Entities and other third parties necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to completion of the
transactions contemplated hereby. Without limiting the generality of the
foregoing, Parent and Company agree that if all of the conditions to Closing set
forth in Article VII have been satisfied or waived other than the condition set
forth in Section 7.3(c) and if, and to the extent that, it would result in the
condition set forth in Section 7.3(c) being satisfied, Parent and Company shall
use reasonable efforts to effect the sale by Company or one or more of its
Subsidiaries to Parent or one or more of its Subsidiaries of receivables owned
by Company or its Subsidiaries at a purchase price of 100% of the amount of the
receivables as reflected on the books and records of Parent or the applicable
Subsidiary of Parent. In the event that the actions contemplated by the
immediately preceding sentence would require more than reasonable efforts or
would not result in the satisfaction of the condition set forth in
Section 7.3(c), Parent and Company shall cooperate in good faith and use
reasonable efforts to cause the condition set forth in Section 7.3(c) to be
satisfied.
(c) Parent and Company shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Form S-4 and the Proxy Statement/Prospectus
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or any other statement, filing, notice or application made by or on behalf of
Parent, Company or any of their respective Subsidiaries to any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement.
6.3 ACCESS TO INFORMATION. (a) On and after the Access Date, upon
reasonable notice and subject to applicable laws relating to the exchange of
information, Company shall, and shall cause its Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of Parent,
reasonable access, during normal business hours during the period prior to the
Effective Time, to all its personnel, properties, books, contracts, commitments
and records (provided that such access does not, in the Company's reasonable
opinion, unreasonably interfere with the Company's business operations and that
such access is coordinated through Company's senior management) and, during such
period, Company shall, and shall cause its Subsidiaries to, make available to
Parent and such other parties (i) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws or other federal or state laws
(other than reports or documents which Company is not permitted to disclose
under applicable law) and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request, in all cases so that
Parent may have full opportunity to make such reasonable investigations as it
desires of the affairs and assets of Company. Neither Company nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of Company or any of its
Subsidiaries or contravene any law, rule, regulation, order, judgment, decree,
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) Company shall use its reasonable efforts to make available to the
officers, employees, accountants, counsel and other representatives of Parent,
during normal business hours during the period prior to the Effective Time,
representatives of Financial Security Assurance Inc. ("FSA") for the purpose of
discussing the impact of the transactions contemplated hereby on the
securitization transactions effected by Company and its Subsidiaries and such
other matters as shall be reasonably raised by Parent, provided, that such
access shall be coordinated through Company's senior management and that
representatives of Company shall be permitted to attend all meetings and
participate in all phone calls with representatives of FSA.
(c) Parent shall, and shall cause its representatives to, hold all
information furnished by or on behalf of Company or any of Company's
Subsidiaries or representatives pursuant to Section 6.3(a) in confidence to the
extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated April 30, 1999 between Parent and Company (the
"CONFIDENTIALITY AGREEMENT").
(d) No investigation by Parent or its representatives shall affect the
representations and warranties of Company set forth herein.
6.4 EMPLOYEE BENEFITS. (a) For one year following the Effective Time,
employees of Company and its Subsidiaries who continue their employment with the
Surviving Corporation, Parent or any of their respective Subsidiaries
("CONTINUED EMPLOYEES") will be provided employee benefits which, in the
aggregate, are no less favorable than the benefits provided under Company's
Employee Plans to the Continued Employees immediately prior to the Effective
Time; PROVIDED, HOWEVER, that nothing contained herein shall constitute a
commitment or obligation on the part of Parent, the Surviving Corporation or any
of their respective subsidiaries to adopt or continue any individual benefit
arrangement or term thereof and that nothing herein shall interfere with the
Surviving Corporation's right to take any action or refrain from taking any
action which Company or any of its Subsidiaries could take or refrain from
taking prior to the Effective Time.
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(b) To the extent that Continuing Employees are eligible participate in
employee benefit plans of Parent, such Continuing Employee shall be given credit
for service with Company and its Subsidiaries, to the same extent as such
service was credited for such purpose by Company under comparable Company
Employee Plans, for purposes of eligibility and vesting. If Continuing Employees
become eligible to participate in a medical, dental or health plan of Parent or
its subsidiaries, Parent shall cause such plan to (i) waive any preexisting
condition limitations for conditions covered under the comparable medical,
health or dental plans which are Company Employee Plans and (ii) honor any
deductible and out of pocket expenses incurred and paid by the Continuing
Employees under the comparable medical, health or dental plans which are Company
Employee Plans during the portion of the calendar year prior to such
participation. Notwithstanding the foregoing, in no event shall any Continuing
Employee be entitled to any credit for service, deductibles or out of pocket
expenses to the extent that it would result in a duplication of benefits with
respect to the same period of service, deductible or out of pocket expenses.
6.5 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. (a) The articles
of incorporation and bylaws of the Surviving Corporation shall contain, to the
extent permitted by law, the provisions with respect to indemnification set
forth in the articles of incorporation and bylaws of Company on the date hereof,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of the persons who at any time prior to the
Effective Time were entitled to such indemnification under the articles of
incorporation or bylaws of Company in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated hereby), unless such modification is required by law;
PROVIDED, that the articles of incorporation and bylaws of the Surviving
Corporation shall not be required to contain such provisions if Parent otherwise
provides the same level of indemnification for such individuals as contained in
the articles of incorporation and bylaws of the Surviving Corporation.
(b) The Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers and directors of Company or any of Company's
Subsidiaries in their capacities as such (each an "INDEMNIFIED PARTY") after the
Effective Time against all losses, expenses, claims, damages or liabilities
arising out of actions or omissions occurring on or prior to the Effective Time
to the fullest extent that Company and its Subsidiaries would have been
permitted under Minnesota law and their respective articles of incorporation or
bylaws, to indemnify such Indemnified Parties.
(c) Parent shall use its reasonable best efforts to cause the persons
serving as officers and directors of Company immediately prior to the Effective
Time to be covered for a period of six years from the Effective Time by the
directors' and officers' liability insurance policy maintained by Company
(provided that Parent may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to acts or omissions occurring prior
to the Effective Time which were committed by such officers and directors in
their capacity as such; PROVIDED, HOWEVER, that in no event shall Parent be
required to expend more than 200% of the current amount expended by Company (the
"INSURANCE AMOUNT") to maintain or procure insurance coverage pursuant hereto
and further PROVIDED, that if Parent is unable to maintain or obtain the
insurance called for by this Section 6.5(c), Parent shall use its reasonable
best efforts to obtain as much comparable insurance as available for the
Insurance Amount.
(d) In the event Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, assume the
obligations set forth in this section. From and after the Effective Time,
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Parent shall unconditionally guarantee the timely payment of any funds owing by,
and the timely performance of all other obligations of, the Surviving
Corporation under this Section 6.5.
(e) The provisions of this Section 6.5 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs and
representatives.
6.6 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any other merger between a Subsidiary
of Company and a Subsidiary of Parent) or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by Parent.
6.7 ADVICE OF CHANGES. Parent and Company shall promptly advise the other
party of any change or event that could reasonably be expected to have a
Material Adverse Effect on it or to delay or impede the ability of Parent, Sub
or Company, respectively, to perform their respective obligations pursuant to
this Agreement and to effect the consummation of the transactions contemplated
hereby; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 6.7 shall not limit or otherwise affect the remedies available hereunder
to any party receiving such notice.
6.8 NO SOLICITATION. (a) Neither Company nor any of its Subsidiaries shall
(whether directly or indirectly through advisors, agents or other
intermediaries), nor shall Company or any of its Subsidiaries authorize or
permit any of its or their officers, directors, agents, representatives or
advisors to, (a) solicit, initiate, encourage (including by way of furnishing
information) or take any action knowingly to facilitate the submission of any
inquiries, proposals or offers (whether or not in writing) from any person other
than Parent that constitutes or may reasonably be expected to lead to, (i) any
acquisition or purchase of any assets of Company or any of its Subsidiaries
(including through the formation of a joint venture) or of any equity securities
of Company or any of its Subsidiaries (except in the case of a transaction
permitted by Section 5.2(c)(i)), (ii) any tender offer or exchange offer
(including a self-tender offer) for any class of equity securities of Company or
any of its material Subsidiaries, (iii) any merger, consolidation, business
combination, reorganization, recapitalization, liquidation, dissolution or
similar transaction involving Company or any of its material Subsidiaries or
(iv) any other transaction the consummation of which would or would reasonably
be expected to impede, interfere with, prevent or materially delay the Merger
(any of the foregoing, a "TRANSACTION PROPOSAL"), or accept, agree to, approve
or endorse any Transaction Proposal or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or otherwise
cooperate in any way with, or knowingly assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of the
foregoing; PROVIDED, that Company may, in response and with respect to a bona
fide unsolicited written proposal from a third party submitted after the date of
this Agreement which constitutes a Superior Proposal (as defined below), engage
in the activities specified in clause (b), if (i) based on the advice of
Company's outside counsel, the Board of Directors of Company determines in good
faith that failure to take such action in response to such a proposal would
constitute a breach by the Board of Directors of Company of its fiduciary duties
under applicable law, (ii) Company has received from such third party an
executed confidentiality agreement with terms not materially less favorable to
Company than those contained in the Confidentiality Agreement and (iii) Company
has complied in all material respects with this Section 6.8. If Company receives
a Transaction Proposal, or a request for nonpublic information relating to
Company or any of its Subsidiaries or for access to the properties, books or
records of Company or any of its Subsidiaries by any Person who is considering
making or has made a Transaction Proposal, it shall immediately inform Parent
orally and shall as promptly as practicable (and in any event within one day)
inform Parent in writing of the terms and conditions of such proposal and the
identity of the person making it, forwarding a copy of any written
communications relating thereto. Company will keep Parent
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informed on as prompt a basis as is practicable of the status and details of any
such Transaction Proposal or request and any related discussions or
negotiations, including by forwarding copies of any material written
communications relating thereto. Company will immediately cease and cause its
Subsidiaries, and its and their officers, directors, agents, representatives and
advisors, to cease any and all existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing, and
shall use its reasonable efforts to cause any such parties in possession of
confidential information about Company or its Subsidiaries that was furnished by
or on behalf of Company or its Subsidiaries in connection with any of the
foregoing to return or destroy all such information in the possession of any
such party or in the possession of any agent or advisor of any such party.
Company agrees not to release any third party from, or waive any provisions of,
any confidentiality or standstill agreement to which it or its Subsidiaries is a
party. Company shall ensure that the officers, directors and employees of
Company and its Subsidiaries and any investment banker or other advisor or
representative retained by such party are aware of and instructed to comply with
the restrictions described in this Section 6.8. Nothing in this Section 6.8
shall prohibit Company or its Board of Directors from taking and disclosing to
Company's shareholders a position with respect to a Transaction Proposal by a
third party to the extent required under the Exchange Act, including
Rules 14e-2 and 14d-9 thereunder, or from making such disclosure to Company's
shareholders which, based on the advice of Company's outside counsel, the Board
of Directors of Company determines in good faith, is required under applicable
law; PROVIDED, that nothing in this sentence shall affect the obligations of
Company and its Board of Directors under any other provision of this Agreement.
For purposes of this Agreement, a "SUPERIOR PROPOSAL" means a bona fide written
Transaction Proposal for at least a majority of the outstanding fully-diluted
shares of Company Common Stock or for all or substantially all of the
consolidated assets of Company made by a Third Party after the date hereof for
which all necessary financing is committed in full and which, if accepted, is
reasonably likely to be consummated and taking into account all legal, financial
and regulatory aspects of the proposal and the person making such proposal,
including the relative expected consummation date, is financially superior to
the holders of Company Common Stock as compared to the Merger.
(b) Unless this Agreement shall have been terminated in accordance with
Section 8.1 Company shall not amend, modify or waive any provision of the
Company Rights Agreement, and shall not take any action to redeem the Company
Rights or render the Company Rights inapplicable to any transaction other than
the transactions to be effected pursuant to this Agreement, which is reasonably
likely to reduce the likelihood of or delay the consummation of the Merger, or
result in any increase in the costs or decrease in the benefits to Parent of the
Merger, or affect the capitalization of Parent or any of its affiliates after
the Merger.
6.9 PUBLICITY. Company, on the one hand, and Parent and Sub, on the other
hand, will consult with each other before holding any press conferences, analyst
calls or other meetings or discussions and before issuing any press releases or
other public announcements or statements regarding the transactions contemplated
hereby or by the Support Agreement or the Receivables Agreements. The parties
will provide each other the opportunity to review and comment upon any press
release or other public announcement or statement with respect to the
transactions contemplated by this Agreement, the Support Agreement or the
Receivables Agreements, including the Merger, and shall not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof. In addition, Company shall, and shall
cause its Subsidiaries to, (a) consult with Parent regarding communications with
shareholders and employees relating to the transactions contemplated hereby,
(b) provide Parent with shareholder lists of Company and (c) allow and
facilitate Parent contact with shareholders of Company.
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6.10 STOCKHOLDER LITIGATION. The parties to this Agreement shall cooperate
and consult with one another, to the fullest extent possible, in connection with
any stockholder litigation against any of them or any of their respective
directors or officers with respect to the transactions contemplated by this
Agreement, the Support Agreement or the Receivables Agreements. In furtherance
of and without in any way limiting the foregoing, each of the parties shall use
its respective reasonable best efforts to prevail in such litigation so as to
permit the consummation of the transactions contemplated by this Agreement in
the manner contemplated by this Agreement. Notwithstanding the foregoing,
Company agrees that it will not compromise or settle any litigation commenced
against it or its directors or officers relating to this Agreement, the Support
Agreement or the Receivables Agreements or the transactions contemplated hereby
or thereby (including the Merger) without Parent's prior written consent, which
shall not be unreasonably withheld.
6.11 ANTI-TAKEOVER PROVISIONS. (a) Each party will take all steps
necessary to exempt (or continue the exemption of) the Merger and the other
transactions contemplated hereby and by the Support Agreement and the
Receivables Agreements from, and challenge the validity of the MBCA (including
Sections 302A.671, 302A.673 and 302A.675 thereof), as now or hereafter in
effect.
(b) The Board of Directors of Company shall take all further action (in
addition to that referred to in Section 3.24), if any, necessary in order to
render the Company Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement.
6.12 STOP TRANSFER. Company acknowledges and agrees to be bound by and
comply with the provisions of Section 3(c) of the Support Agreement as if a
party thereto with respect to transfers of record ownership of shares of Company
Common Stock and agrees to notify the transfer agent for any such shares and
provide such documentation and do such other things as may be necessary to
effectuate the provisions of such agreement.
6.13 [Intentionally Omitted]
6.14 AGREED UPON PROCEDURES. Immediately after the date of this Agreement,
Parent shall engage Ernst & Young LLP ("E&Y"), at Parent's expense, to conduct
the procedures set forth in Exhibit B hereto and to render to Parent in writing
(with a copy to Company) a report with respect thereto. Parent shall instruct
E&Y to complete its report as promptly as practicable, but in any event within
40 days of the date of this Agreement.
6.15 [Intentionally Omitted]
6.16 TAX SCHEDULES. Prior to the Closing Date, Company shall use
reasonable best efforts to cooperate with Parent and assist Parent in preparing
schedules reasonably acceptable to Parent that accurately set forth as of the
Effective Time (i) the tax basis of the assets held by Company and its
Subsidiaries; (ii) the amount of each item of deferred tax liability and
deferred tax assets included on Company's audited financial statements for
fiscal 1998; and (iii) details of any accrual for contingent tax liabilities of
Company and its Subsidiaries. Parent shall engage, at Parent's expense, Ernst &
Young LLP or another accounting firm reasonably acceptable to Company to prepare
the Schedules described in this Section 6.16.
6.17 LISTING. Prior to the Effective Time, Parent shall file a listing
application with a national securities exchange with respect to the RVOs issued
or issuable in connection with the Merger and shall use all reasonable efforts
to have such RVOs approved for quotation on such national securities exchange.
6.18 EMPLOYEE RETENTION. Prior to the Effective Time, at Parent's request
Company shall establish a key employee retention program upon terms reasonably
satisfactory to Parent and Company. Company shall establish a liability in
accordance with GAAP on its books and records in connection with any such
retention program.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) COMPANY SHAREHOLDER APPROVAL. The Company Shareholder Approval shall
have been obtained in accordance with applicable law.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated,
issued or enforced by any court of competent jurisdiction or Governmental Entity
which prohibits, prevents, materially restricts or makes illegal the
consummation of the Merger or the Receivables Agreements, which has not been
vacated, dismissed or withdrawn prior to the Effective Time. Parent and Company
shall use their reasonable best efforts to have any of the foregoing, vacated,
dismissed or withdrawn by the Effective Time.
(c) HSR ACT. The applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) EFFECTIVENESS OF THE FORM S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated by the SEC and not
concluded or withdrawn.
7.2 CONDITIONS TO COMPANY'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of Company to effect the Merger are subject to the satisfaction at
or prior to the Effective Time of the following additional conditions:
(a) The representations of Parent and Sub contained in this Agreement,
shall have been true and correct (in all material respects, in the case of
representations and warranties not already qualified as to materiality by their
terms) when made and shall be true and correct (in all material respects, in the
case of representations and warranties not already qualified as to materiality
by their terms) at and as of the Effective Time as though made on and as of such
date (except (i) for changes specifically permitted by this Agreement and
(ii) that those representations and warranties which address matters only as of
a particular date shall remain true and correct as of such date), and Company
shall have received a certificate of the Chief Executive Officer or the
President and Chief Operating Officer of Parent to the foregoing effect.
(b) Parent and Sub shall have performed and complied with in all material
respects their obligations under this Agreement to be performed or complied with
on or prior to the Effective Time, and Company shall have received a certificate
of the Chief Executive Officer or the President and Chief Operating Officer of
Parent to the foregoing effect.
7.3 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS TO EFFECT THE MERGER. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) The representations of Company contained in this Agreement shall have
been true and correct when made and shall be true and correct (in all material
respects, in the case of representations and warranties not already qualified as
to materiality by their terms) at and as of the Effective Time as though made on
and as of such date (except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date), and Parent shall have received a certificate of the Chief
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Executive Officer, the Senior Executive Vice President and Chief Financial
Officer or the Executive Vice President, Controller and Chief Accounting Officer
of Company to the foregoing effect.
(b) Company shall have performed and complied with in all material respects
its obligations under this Agreement to be performed or complied with on or
prior to the Effective Time, and Parent shall have received a certificate of the
Chief Executive Officer, the Senior Executive Vice President and Chief Financial
Officer or the Executive Vice President, Controller and Chief Accounting Officer
of Company to the foregoing effect.
(c) All Requisite Regulatory Approvals shall have been obtained and be in
effect at the Effective Time.
(d) Neither Parent, Sub nor any of their affiliates shall have become an
"Acquiring Person", and no "Stock Acquisition Date", "Distribution Date", or
"Triggering Event" (as such terms are defined in the Company Rights Agreement)
shall have occurred pursuant to the Company Rights Agreement.
(e) The number of Dissenting Shares as of the Effective Time shall be less
than 10% of the number of shares of Company Common Stock outstanding at the
Effective Time.
(f) Any consent required of, or notice or other document required to be
delivered to, FSA in connection with the transactions contemplated hereby or by
the Receivables Agreements pursuant to the Securitization Agreements shall have
been obtained or given and be in effect at the Effective Time.
(g) All consents or approvals of or filings with any third party which are
necessary to consummate the transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect, other than such
consents, approvals or filings the failure of which to have been obtained or
made could not, individually or in the aggregate, be reasonably expected to have
a Material Adverse Effect on Company or the Surviving Corporation.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of Company
of the matters presented in connection with the Merger:
(a) by mutual consent of Parent and Company;
(b) by either Parent or the Board of Directors of Company if (i) any
Governmental Entity of competent jurisdiction which must grant a Requisite
Regulatory Approval the receipt of which is a condition to the Obligations of
Parent and Sub pursuant to Section 7.3(c) has denied such approval and such
denial has become final and nonappealable or any Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and nonappealable, PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 8.1(b)(i) shall not be
available to any party whose failure to comply with Section 6.2 or any other
provision of this Agreement has been the cause of such action, (ii) the Company
Shareholder Approval shall not have been received at the Company Shareholders
Meeting duly called and held or (iii) the Effective Time shall not have occurred
on or before 180 days after the execution by all parties of this Agreement (the
"TERMINATION DATE"), PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.1(b)(iii) shall not be available to any party
whose failure to fulfill any obligations under this Agreement has been the
primary cause of the failure of the Effective Time to occur on or before the
Termination Date until ten business days after such failure has been cured.
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(c) by the Board of Directors of Company, if, prior to Effective Time,
(i) Parent or Sub shall have failed to perform in any material respect any of
their obligations under this Agreement to be performed at or prior to such date
of termination, which failure to perform is not cured or is incapable of being
cured within 10 days after the receipt by Parent of written notice of such
failure, (ii) any representation or warranty of Parent or Sub contained in this
Agreement shall not be true and correct (except for changes permitted by this
Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and correct which are not reasonably likely to
materially adversely affect Parents's or Sub's ability to complete the Merger,
PROVIDED, that such failure to be true and correct is not cured or is incapable
of being cured within 10 days after the receipt by Parent of written notice of
such failure or (iii) prior to the Company Shareholder Approval, upon five
business days' prior irrevocable written notice to Parent, in order to accept an
unsolicited Superior Proposal; PROVIDED, HOWEVER, that (A) such notice shall
include a copy of any proposed or definitive documentation relating to such
Superior Proposal (including all financing documentation), and shall otherwise
specify all material terms, conditions and other information with respect
thereto and (B) prior to any such termination, Company shall, if requested by
Parent in connection with any revised proposal Parent might make, negotiate in
good faith for such five business day period with Parent, and such third party
proposal remains a Superior Proposal after taking into account any revised
proposal during such five business day period; and PROVIDED, FURTHER, that it
shall be a condition to termination pursuant to this Section 8.1(c)(iii) that
Company shall have made the payment of the fee to Parent required by Section
8.2(c) and the payment in respect of Parent Expenses required by Section 8.2(b);
(d) by Parent, if, prior to Effective Time, (i) Company shall have failed
to perform in any material respect any of its obligations under this Agreement
to be performed at or prior to such date of termination, which failure to
perform is not cured or is incapable of being cured within 10 days after the
receipt by Company of written notice of such failure, (ii) any representation or
warranty of Company contained in this Agreement shall not be true and correct
(except for changes permitted by this Agreement and those representations which
address matters only as of a particular date shall remain true and correct as of
such date), except, in any case, such failures to be true and correct which are
not reasonably likely to materially adversely affect Company's ability to
complete the Merger, PROVIDED, that such failure to be true and correct is not
cured or is incapable of being cured within ten days after the receipt by
Company of written notice of such failure, (iii) the Board of Directors of
Company withdraws or materially modifies or changes its recommendation of this
Agreement and/or transactions contemplated hereby (including the Merger) in a
manner adverse to Parent or Sub or approves, accepts or recommends another
Transaction Proposal or fails to reconfirm such recommendation if so requested
by Parent, within 10 business days following such request; (iv) (A) if a
Transaction Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to Company which contains a proposal as to
price (without regard to the specificity of such price proposal) and
(B) Company shall not have rejected such Acquisition Proposal within 10 business
days after the date its existence first becomes publicly disclosed; (v) Parent,
Sub or any of their affiliates shall have become an "Acquiring Person", or a
"Stock Acquisition Date", "Distribution Date", or "Triggering Event" (as such
terms are defined in the Company Rights Agreement) shall have occurred pursuant
to the Company Rights Agreement; or (vi) the conclusions of E&Y set forth in its
report rendered to Parent pursuant to Section 6.14 hereof shall not be
reasonably consistent with information previously provided E&Y or Parent by
Company; PROVIDED, HOWEVER, that any termination by Parent pursuant to Section
8.1(d) (vi) must occur within 45 days after the date of this Agreement.
8.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either Parent or Company as provided in Section 8.1, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
shall forthwith become void and have no effect, and none of Parent, Company, any
of
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their respective affiliates or any of the officers or directors of any of them
shall have any liability of any nature whatsoever hereunder, or in connection
with the transactions contemplated hereby, except that (i) Section 6.3(c), this
Section 8.2 and Article IX shall survive any termination of this Agreement,
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither Parent nor Company shall be relieved or released from any liabilities or
damages arising out of its breach of any provision of this Agreement and
(iii) Company shall pay to Parent the Termination Fee (as defined below) and
Parent Expenses (as defined below), if applicable, in accordance with this
Section 8.2.
(b) In addition to any other amounts which may be payable to Parent
pursuant to any other paragraph of this Section 8.2, Company shall, following
the termination of this Agreement pursuant to Section 8.1(c)(iii) or pursuant to
Section 8.1(d)(iii), (iv) or (v) promptly, but in no event later than one
business day following written notice thereof, together with reasonable
supporting documentation, reimburse Parent, in an aggregate amount of up to $1
million, for all out-of-pocket expenses and fees (including reasonable fees
payable to all counsel, accountants, financial advisors, financial printers,
experts and consultants), whether incurred prior to, concurrently with or after
the execution of this Agreement (up to the date of termination), in connection
with the preparation, negotiation and execution of this Agreement and the other
agreements contemplated hereby and the consummation of the transactions
contemplated by this Agreement (collectively, the "PARENT EXPENSES").
(c) In the event that this Agreement is terminated by Parent pursuant to
clause (d)(iii), (d)(iv) or (d)(v) of Section 8.1 or by Company pursuant to
Section 8.1(c)(iii), Company shall pay to Parent by wire transfer of immediately
available funds to an account designated by Parent on the next business day
following such termination an amount equal to $8 million (the "TERMINATION
FEE").
(d) If a Transaction Proposal relating to more than 15% of the outstanding
fully diluted Company Common Stock or any other class of equity securities or
more than 15% of the consolidated assets of Company is commenced, publicly
disclosed, publicly proposed or otherwise communicated or made known to Company
at any time on or after the date of this Agreement and prior to the termination
hereof, and this Agreement is terminated pursuant to clause (b)(ii) or (b)(iii)
(but, in the case of clause (b)(iii), only if the Company Shareholders Meeting
has not been duly held) of Section 8.1; clause (d)(i) of Section 8.1 based on a
breach of Section 6.8 or a willful failure to perform any other obligation
hereunder; or clause (d)(ii) of Section 8.1 based on a willful act or omission
causing a representation or warranty not to be true, and within 12 months of the
date of such termination, Company enters into a definitive agreement with
respect to, or consummates, any Transaction Proposal relating to more than 15%
of the outstanding fully diluted Company Common Stock or any other class of
equity securities or more than 15% of the consolidated assets of Company, then
Company shall pay to Parent an amount equal to the Termination Fee, plus any
amount paid by Parent pursuant to Section 8.2(d), concurrently with the earlier
of the execution of such definitive agreement or the consummation of such
Transaction Proposal.
(e) In the event that this Agreement is terminated pursuant to clause
(b)(i), (b)(ii), (b)(iii), (c)(i), (c)(ii), (d)(i), (d)(ii) or (d)(vi) of
Section 8.1 and Company paid a prepayment penalty resulting from a failure to
deliver receivables to the prefunded Securitization Trust 1999-C originated by
Company, Parent shall pay to Company the amount of such penalty paid by Company
(but not in excess of $3,759,560), provided, that no amount shall be payable
pursuant to this Section 8.2(e) in the event that Company is obligated to pay
the Termination Fee.
(f) If Company or Parent fails to pay any amounts due under this Section
8.2 within the time periods specified herein, such party shall pay to the other
all costs and expenses (including legal fees and expenses) incurred by the other
party in connection with any action or proceeding (including the filing of any
lawsuit) taken by it to collect such unpaid amounts, together with interest on
such unpaid amounts at the publicly announced prime or base lending rate of The
Chase Manhattan Bank from the date such amounts were required to be paid until
the date actually received by Parent.
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8.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the shareholders of Company;
PROVIDED, HOWEVER, that after any approval of the transactions contemplated by
this Agreement by the shareholders of Company, there may not be, without further
approval of such shareholders, any amendment of this Agreement which changes the
amount or the form of the consideration to be delivered to the holders of
Company Common Stock hereunder other than as contemplated by this Agreement.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein; PROVIDED, HOWEVER, that
after any approval of the transactions contemplated by this Agreement by the
shareholders of Company, there may not be, without further approval of such
shareholders, any extension or waiver of this Agreement or any portion thereof
which reduces the amount or changes the form of the consideration to be
delivered to the holders of Company Common Stock hereunder other than as
contemplated by this Agreement. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement (other than pursuant to the
Support Agreement and the Receivables Agreements, which shall terminate in
accordance with their respective terms) shall survive the Effective Time, except
for those covenants and agreements contained herein and therein which by their
terms apply in whole or in part after the Effective Time.
9.2 EXPENSES. Subject to Section 8.2(b), all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense; PROVIDED, HOWEVER, that the costs
and expenses of printing and mailing the Form S-4 and the Proxy
Statement/Prospectus, and all filing and other fees paid to the SEC in
connection with the Merger, shall be borne equally by Company and Parent.
9.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given (i) when delivered personally to the
recipient, (ii) when sent to the recipient by telecopy (receipt electronically
confirmed by sender's telecopy machine) if during normal business hours of the
recipient, otherwise on the next business day, (iii) one business day after the
date when sent to the recipient by reputable express courier service (charges
prepaid), or (iv) seven business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
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prepaid. Such notices and other communications shall be sent to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent, to:
Associates First Capital Corporation
000 Xxxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
and
(b) if to Company, to:
Arcadia Financial Ltd.
0000 Xxxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
with copies to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx., Esq.
Fax: (000) 000-0000
and
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
9.4 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". No provision of this Agreement shall be construed to require
Company, Parent or any of their respective Subsidiaries or affiliates to take
any action which would violate any applicable law, rule or regulation.
9.5. COUNTERPARTS; FACSIMILE. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts
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have been signed by each of the parties and delivered to the other parties, it
being understood that all parties need not sign the same counterpart. This
Agreement may be executed by facsimile signatures of the parties hereto.
9.6 ENTIRE AGREEMENT. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof other than the Support
Agreement, the Confidentiality Agreement and the Receivables Agreements (each of
which is enforceable in accordance with the specific terms of the respective
agreement).
9.7 GOVERNING LAW. Except to the extent that the laws of the State of
Minnesota are mandatorily applicable to the Merger, this Agreement shall be
governed and construed in accordance with the laws of the State of New York,
without regard to any applicable principles of conflicts of law.
9.8 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
9.9 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
specifically provided in Section 6.5, this Agreement (including the documents
and instruments referred to herein) is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
9.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court or New York
State court sitting in the Borough of Manhattan, City of New York, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.11 SCHEDULES. The disclosure of any item in a Disclosure Schedule to
this Agreement shall be deemed to be a disclosure for all purposes of this
Agreement on any other Schedule on which it is specifically referenced or
identified, but shall expressly not be deemed to constitute an admission by
either party, or to otherwise imply or concede that any item is material or
would (or would be reasonably likely to) have a Material Adverse Effect for
purposes of this Agreement.
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IN WITNESS WHEREOF, Parent, Sub and Company have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
ASSOCIATES FIRST CAPITAL CORPORATION
By: /s/ XXX XXXXXXX
-----------------------------------------
Name: Xxx Xxxxxxx
Title: Senior Executive Vice President and
Chief Financial Officer
AFCC NEWCO, INC.
By: /s/ XXX XXXXXXX
-----------------------------------------
Name: Xxx Xxxxxxx
Title: Senior Executive Vice President and
Chief Financial Officer
ARCADIA FINANCIAL LTD.
By: /s/ XXXXXXX XXXXXXXXXX
-----------------------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
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EXHIBIT A
TERMS OF RESIDUAL VALUE OBLIGATION
PAYMENT RIGHT: Each RVO shall represent the right to receive an
amount in cash equal to a PRO RATA share of 50% of
the Residual Cash Flow remaining after application
of the Residual Cash Flow to the AFCC Amount, RVO
Expenses and Litigation Expenses, calculated
pursuant to, and subject to, the terms below.
PAYMENT DATES: Amounts allocated for payment on the RVOs as
provided below under "Application of Residual Cash
Flow", if any, will be paid on the second business
day after the Distribution Dates in April, July,
October and January to holders of record on the
immediately preceding March 1, June 1, September 1
or December 1, respectively, commencing with the
first payment date following the Effective Time
(or, if the Effective Time is after the record date
in respect of such first payment date, then on the
next succeeding payment date).
APPLICATION OF RESIDUAL CASH FLOW: On the business day after each Distribution Date
occurring after the Effective Time (each such day,
an "ALLOCATION DATE"), the Residual Cash Flow
received on such Distribution Date (including as a
result of the addition of Litigation Reserve
Interest) shall be allocated as follows:
1. 100% to reduce RVO Expenses incurred after the
third preceding Distribution Date and on or prior
to the second preceding Distribution Date
(provided, that, in the case of the first
allocation date occurring after the Effective Time,
the allocation shall be 100% to reduce RVO Expenses
incurred on or after November 12, 1999 and on or
prior to the second preceding Distribution Date),
PLUS any RVO Expenses incurred on or prior to the
third preceding Distribution Date which were not
previously reduced by a prior allocation of
Residual Cash Flow, until such amounts have been
reduced to zero, then
2. 100% of the remaining Residual Cash Flow, if
any, to reduce Litigation Expenses incurred after
the third preceding Distribution Date and on or
prior to the second preceding Distribution Date
(provided, that, in the case of the first
allocation date occurring after the Effective Time,
the allocation shall be 100% to reduce Litigation
Expenses incurred on or after November 12, 1999 and
on or prior to the second preceding Distribution
Date), PLUS any Litigation Expenses incurred on or
prior to the third preceding Distribution Date
which were not previously reduced by a prior
allocation of Residual Cash Flow, until such
amounts have been reduced to zero, then
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3. 100% of remaining Residual Cash Flow, if any, to
reduce the AFCC Amount until the AFCC Amount has
been reduced to zero, then
4. 50% of remaining Residual Cash Flow, if any, to
make payments on the RVOs.
In addition to, and after giving effect to, the
allocation of Residual Cash Flow described above,
on the second allocation date following the final
disposition of all litigation giving rise to
Damages and the final determination of all legal
fees and expenses related thereto, an amount equal
to the excess, if any, of (i) the aggregate amount
of Residual Cash Flow allocated to reduce
Litigation Expenses pursuant to clause 2 above
(calculated after giving effect to the allocation
of Residual Cash Flow described above on such
allocation date) over (ii) the aggregate amount of
Damages, shall be allocated as follows:
1. 100% to reduce the AFCC Amount (calculated after
giving effect to the allocation of Residual Cash
Flow described above on such allocation date) until
the AFCC Amount has been reduced to zero, then
2. 50% of remaining Residual Cash Flow, if any, to
make payments on the RVOs.
Amounts allocated on an Allocation Date to make
payments on the RVOs shall accrue interest from and
including such Allocation Date through and
including the day prior to the payment of such
amounts at 30-day LIBOR as in effect at the end of
the day on such Allocation Date.
Notwithstanding the foregoing, Parent shall not be
required to make payments on the RVOs on any
payment date if the amount of the payment that
would otherwise be made on each RVO would be less
than $0.05. Any amounts not paid in accordance with
this paragraph shall (i) be carried over to the
next payment date, (ii) continue to accrue interest
as provided in the immediately preceding paragraph
and (iii) subject to the immediately preceding
sentence, be allocated 100% to make payments on the
RVOs.
RESIDUAL CASH FLOW: "RESIDUAL CASH FLOW" means the cash actually
released from the "spread accounts" established in
connection with the securitization transactions
listed on Annex 1 to this Exhibit A on or after
September 30, 1999 and the cash flow (net of
losses, servicing expenses and funding costs
pursuant to the terms of the related securitization
transactions) from any receivables which were
securitized as of September 30, 1999 in connection
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with such securitization transactions but are no
longer securitized for any reason; PROVIDED, that
Residual Cash Flow shall be INCREASED on each
Distribution Date after the Effective Time by the
amount of Litigation Reserve Interest, if any, for
the period ending on the day prior to such
Distribution Date and beginning on the immediately
preceding Distribution Date; and, PROVIDED,
FURTHER, that Residual Cash Flow shall be decreased
on each Distribution Date after September 30, 1999
by all cash actually released from the "spread
accounts" established in connection with the
securitization transactions listed on Annex 1 to
this Exhibit A during the period ending on the day
prior to such Distribution Date and beginning on
the immediately preceding Distribution Date which
cash is contractually required to be applied other
than as provided above under "Application of
Residual Cash Flow". In calculating Residual Cash
Flow, GAP insurance will be included and
repossession expenses (other than repossession
expenses paid to an auction house) will be
excluded.
"LITIGATION RESERVE INTEREST", for any period,
means interest accrued during such period on the
excess, if any, of (i) the aggregate amount of
Residual Cash Flow allocated to reduce Litigation
Expenses over (ii) the aggregate amount of Damages
(such excess being calculated as of the day after
the allocation date during such period) at 30-day
LIBOR as of the end of the first day of such
period.
AFCC AMOUNT; AFCC AMOUNT INTEREST: "AFCC AMOUNT" means $512 million; PROVIDED, that
such amount shall be (i) DECREASED on the Closing
Date by the amount of the Residual Cash Flow
generated on and after September 30, 1999 and prior
to the Closing Date, (ii) INCREASED on each
Distribution Date by the amount of AFCC Amount
Interest for the period ending on the day prior to
such Distribution Date and beginning on the
immediately preceding Distribution Date and (iii)
DECREASED (but without duplication of any decrease
pursuant to clause (i) above) on each allocation
date by the amount of Residual Cash Flow allocated
to the reduction of the AFCC Amount on such date as
provided above under "Application of Residual Cash
Flow".
"AFCC AMOUNT INTEREST", for any period, means
interest accrued during such period at the rate of
1.25% per month on the AFCC Amount as of the first
day of such period (after giving effect to any
increase in the AFCC Amount on such date). AFCC
Amount Interest shall be calculated on a 30/360 day
basis.
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LISTING: Parent shall use reasonable efforts to arrange for
the listing of the RVOs on a national securities
exchange.
NUMBER OF RVOS TO BE ISSUED: In accordance with the Agreement to which this
Exhibit A is attached. The RVOs shall be issued
pursuant to a RVO agreement between Parent and a
trustee (or person acting in a similar capacity)
reasonably acceptable to Company.
MINIMUM PAYMENT: None.
DETERMINATIONS: Parent's determination of all amounts and other
matters shall be final and conclusive in the
absence of manifest error; PROVIDED, that Parent
shall engage its independent auditors to review the
calculations and determinations made by Parent to
the same extent as Parent engages its independent
auditors to perform a similar function with respect
to securitization transactions effected by or for
the benefit of Parent and its Subsidiaries.
All interest amounts other than AFCC Amount
Interest shall be calculated on the basis of the
actual number of days elapsed and a 360-day year.
SERVICING: Parent shall, or shall cause its affiliates to,
service or arrange for the servicing of the
receivables giving rise to Residual Cash Flow in
accordance with customary business practices and
Parent's applicable policies and procedures and, if
Parent or any of its Subsidiaries is then
servicing, or arranging for the servicing of,
indirectly originated automobile loans, consistent
with such servicing.
CLEAN-UP CALL: Parent shall have an option to purchase for fair
value (as determined in good faith by Parent) all
outstanding RVOs at any time when the amount of the
receivables remaining in the securitization trusts
listed in Annex 1 to this Exhibit A is less than or
equal to 5% of the amount of the receivables
remaining in the securitization Trusts listed in
Annex 1 to this Exhibit A as of the Closing Date.
DEFINITIONS:
TERMS NOT DEFINED: Capitalized terms used in this Exhibit A without
definition shall have the definitions assigned
thereto in the Agreement to which this Exhibit A is
attached.
DISTRIBUTION DATE: Each "distribution date" in connection with the
securitization transactions listed on Annex 1 to
this Exhibit A.
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RVO EXPENSES: "RVO EXPENSES" means the sum of (i) the out-of-
pocket fees and expenses paid or incurred directly
or indirectly by Parent relating to the issuance
and administration of the RVOs (including, without
limitation, fees and expenses of printing
certificates representing the RVOs; fees and
expenses of the transfer agent and
registrar/trustee for the RVOs; and related legal
expenses), but excluding accounting fees and
expenses, audit fees, if any, and the fees and
expenses relating to the listing of the RVOs on a
national securities exchange and (ii) the
reasonable actual or reasonably imputed cost to
Parent of providing alternative credit support in
connection with the early release of cash from the
"spread accounts" established in connection with
the securitization transactions listed on Annex 1
to this Exhibit A; PROVIDED, that the costs
referenced in this clause (ii) shall be included as
RVO Expenses as such costs are incurred (or deemed
to be incurred if imputed) or, at Parent's
election, in a lump sum calculated on a present
value basis (discounted at the rate of 1.25% per
month) at the time of the related release of cash.
LITIGATION EXPENSES; LITIGATION INTEREST: "LITIGATION EXPENSES" means the sum of (i)
$10,000,000 and (ii) the, amount of all damages,
judgments, settlements, defense costs and other
expenses paid or incurred by Company, Parent or any
of their Affiliates after the date of the Agreement
to which this Exhibit A is attached in connection
with any litigation brought by or on behalf of
shareholders of Company or by or in the right of
Company, net of insurance proceeds, if any (the
amount referred to in this clause (ii) being
referred to herein as, "DAMAGES"); PROVIDED, that
the aggregate amount of the Damages shall be deemed
to be INCREASED on each Distribution Date by the
amount of Litigation Interest for the period ending
on the day prior to such Distribution Date and
beginning on the immediately preceding Distribution
Date.
"LITIGATION INTEREST", for any period, means
interest accrued during such period on the amount
of Damages as of the first day of such period
(after giving effect to any increase in Damages on
such date) at 30-day LIBOR as of the end of the
first day of such period.
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ANNEX 1
Olympic Automobile Receivables Trust, 1994-B
Olympic Automobile Receivables Trust, 1995-A
Olympic Automobile Receivables Trust, 1995-B
Olympic Automobile Receivables Trust, 1995-C
Olympic Automobile Receivables Trust, 1995-D
Olympic Automobile Receivables Trust, 1995-E
Olympic Automobile Receivables Trust, 1996-A
Olympic Automobile Receivables Trust, 1996-B
Olympic Automobile Receivables Trust, 1996-C
Olympic Automobile Receivables Trust, 1996-D
Olympic Automobile Receivables Trust, 1997-A
Arcadia Automobile Receivables Trust, 1997-B
Arcadia Automobile Receivables Trust, 1997-C
Arcadia Automobile Receivables Trust, 1997-D
Arcadia Automobile Receivables Trust, 1998-A
Arcadia Automobile Receivables Trust, 1998-B
Arcadia Automobile Receivables Trust, 1998-C
Arcadia Automobile Receivables Trust, 1998-D
Arcadia Automobile Receivables Trust, 1998-E
Arcadia Automobile Receivables Trust, 1999-A
Arcadia Automobile Receivables Trust, 1999-B
Arcadia Automobile Receivables Trust, 1999-C
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